As filed with the Securities and Exchange Commission on February 19, 2004

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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003
Commission file number 1-12356

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DAIMLERCHRYSLER AG

(Exact name of Registrant as specified in its charter)

DAIMLERCHRYSLER AG

(Translation of Registrant's name into English)

FEDERAL REPUBLIC OF GERMANY

(Jurisdiction of incorporation or organization)

EPPLESTRASSE225, 70567STUTTGART,GERMANY

(Address of principal executive offices)

Securities
registered or to be registered pursuant to Section 12(b) of the Act.

|Title of each class                               |                                     | Name of each exchange
on which registered                                                                                 
|------------------------------------------------- | ----------------------------------- | --------------------------------------------------------------------------------------------------------------------------
|Ordinary Shares, no par value                     |                                     | Frankfurt Stock Exchange
New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
Philadelphia Stock Exchange
|Guarantee of the following securities of:        
|DaimlerChrysler North America Holding Corporation |                                     |                                                                                                                           
|                                                  | 8.50% Notes Due January 18, 2031    |                                                                                                                           
|                                                  | 7 3/8% Notes Due September 15, 2006 |                                                                                                                           

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Securities
registered or to be registered pursuant to Section 12(g) of the Act.
NONE
(Title of Class)

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Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act.
NONE
(Title of Class)

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Indicate
the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report:

Ordinary
Shares, no par value. . . . . . . . . 1,012,824,191

(as
of December 31, 2003)

Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes /X/

No / /


Indicate
by check mark which financial statement item the registrant has elected to follow.

Item 17 / /

Item 18 /X/


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TABLE OF CONTENTS

|        |  |                                                                   |  | Page
|------- |  | ----------------------------------------------------------------- |  | ----
|PART I 
|Item 1. |  | Identity of Directors, Senior Management and Advisers             |  | 2   
|Item 2. |  | Offer Statistics and Expected Timetable                           |  | 2   
|Item 3. |  | Key Information                                                   |  | 2   
|        |  | Selected Financial Data                                           |  | 2   
|        |  | Risk Factors                                                      |  | 5   
|Item 4. |  | Information on the Company                                        |  | 9   
|        |  | Introduction                                                      |  | 9   
|        |  | Description of Business Segments                                  |  | 13  
|        |  | Mercedes Car Group                                                |  | 13  
|        |  | Chrysler Group                                                    |  | 17  
|        |  | Commercial Vehicles                                               |  | 23  
|        |  | Services                                                          |  | 28  
|        |  | Other Activities                                                  |  | 30  
|        |  | Supplies and Raw Materials                                        |  | 32  
|        |  | Government Regulation and Environmental Matters                   |  | 33  
|        |  | Description of Property                                           |  | 38  
|Item 5. |  | Operating and Financial Review and Prospects                      |  | 41  
|        |  | Introduction                                                      |  | 41  
|        |  | New Accounting Pronouncements                                     |  | 42  
|        |  | Inflation                                                         |  | 45  
|        |  | Critical Accounting Policies                                      |  | 45  
|        |  | Operating Results                                                 |  | 54  
|        |  | Information about Operating Profit                                |  | 54  
|        |  | Overview of Business Segment Revenues and Operating Profit (Loss) |  | 57  
|        |  | 2003 Compared With 2002                                           |  | 59  
|        |  | 2002 Compared With 2001                                           |  | 68  
|        |  | Liquidity and Capital Resources                                   |  | 78  
|        |  | Off-Balance Sheet Arrangements                                    |  | 85  
|        |  | Research and Development                                          |  | 90  
|        |  | Outlook                                                           |  | 92  
|Item 6. |  | Directors, Senior Management and Employees                        |  | 95  
|        |  | Supervisory Board                                                 |  | 95  
|        |  | Board of Management                                               |  | 99  
|        |  | Compensation                                                      |  | 102 
|        |  | Employees and Labor Relations                                     |  | 103 
|        |  | Share Ownership                                                   |  | 104 
|Item 7. |  | Major Shareholders and Related Party Transactions                 |  | 106 
|Item 8. |  | Financial Information                                             |  | 108 
|        |  | Consolidated Financial Statements                                 |  | 108 
|        |  | Other Financial Information                                       |  | 108 
|        |  | Export Sales                                                      |  | 108 
|        |  | Legal Proceedings                                                 |  | 108 
|        |  | Dividend Policy                                                   |  | 111 
|Item 9. |  | The Offer and Listing                                             |  | 112 
|        |  |                                                                   |  |     

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|Item 10.  |  | Additional Information                                                       |  | 115
|--------- |  | ---------------------------------------------------------------------------- |  | ---
|          |  | Options to Purchase Securities from Registrant or Subsidiaries               |  | 115
|          |  | Memorandum and Articles of Association                                       |  | 115
|          |  | Exchange Controls                                                            |  | 120
|          |  | Taxation                                                                     |  | 120
|          |  | Documents on Display                                                         |  | 124
|Item 11.  |  | Quantitative and Qualitative Disclosures About Market Risk                   |  | 124
|          |  | Exchange Rate Risk                                                           |  | 125
|          |  | Interest Rate Risk                                                           |  | 127
|Item 12.  |  | Description of Securities Other than Equity Securities                       |  | 127
|PART II  
|Item 13.  |  | Defaults, Dividend Arrearages and Delinquencies                              |  | 128
|Item 14.  |  | Material Modifications to the Rights of Security Holders and Use of Proceeds |  | 128
|Item 15.  |  | Controls and Procedures                                                      |  | 128
|Item 16A. |  | Audit Committee Financial Expert.                                            |  | 128
|Item 16B. |  | Code of Ethics.                                                              |  | 128
|Item 16C. |  | Principal Accountant Fees and Services.                                      |  | 128
|PART III 
|Item 17.  |  | Financial Statements                                                         |  | 130
|Item 18.  |  | Financial Statements                                                         |  | 130
|Item 19.  |  | Exhibits                                                                     |  | 130

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Presentation

We prepared the audited consolidated financial statements included in this annual report (the "Consolidated Financial Statements") in accordance with generally
accepted accounting principles in the United States of America which we refer to as U.S. GAAP.

Currency Translation

For your convenience, we have translated some of the financial information contained in this annual report from euros into United States dollars ("U.S. dollars"
or "$"). Except where indicated otherwise, we have used an assumed rate of [EURO]1 = $1.2597 for these convenience translations. This rate represents the noon buying rate for euros on
December 31, 2003, in New York City as certified by the Federal Reserve Bank of New York for customs purposes. Our convenience translations do not mean that the dollar amounts actually
represent the underlying euro amounts or that you could convert the euro amounts into dollars at the assumed rate. The rate we used for the convenience translations also differs from the currency
exchange rates we used in the preparation of our Consolidated Financial Statements. Additional information about recent rates of exchange between euros and dollars appears in "Item 3. Key
Information."

Cautionary Statement Regarding Forward-Looking Statements

This annual report contains forward-looking statements that reflect our current views about future events. We use the words "anticipate," "assume," "believe,"
"estimate," "expect," "intend," "may," "plan," "project," "should" and similar expressions to identify forward-looking statements. These statements are subject to many risks and uncertainties,
including:



If
any of these risks and uncertainties occur, or if the assumptions underlying any of our forward-looking statements prove incorrect, then our actual results may be materially different
from those we express or imply by such statements. We do not intend or assume any obligation to update these forward-looking statements. Any forward-looking statement speaks only as of the date on
which it is made.

References

Unless otherwise specified or required by the context, in this annual report, "we," "us," "our," "DaimlerChrysler," the "DaimlerChrysler Group" or the "Group"
refers to DaimlerChrysler AG and its consolidated subsidiaries.

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PART I

Item 1. Identity of Directors, Senior Management and Advisers.

Not applicable.

Item 2. Offer Statistics and Expected Timetable.

Not applicable.

Item 3. Key Information.

SELECTED FINANCIAL DATA

We have derived the selected consolidated financial data presented in the table below from our audited consolidated financial statements for the years ended
December 31, 2003, 2002, 2001, 2000 and 1999. You should read the table together with our Consolidated Financial Statements and the discussion in "Item 5. Operating and Financial Review and
Prospects."

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|                                                                                                                                   |                                   | Year Ended December 31, |        
|---------------------------------------------------------------------------------------------------------------------------------- | --------------------------------- | ----------------------- | -------
|
|
|Income Statement Data:                                                                                                             |                                   |                         |        
|Revenues                                                                                                                           |                                   | $                       | 171,870
|Income (loss) before financial income                                                                                              |                                   |                         | 4,298  
|Income (loss) from continuing operations and before extraordinary items and cumulative effects of changes in accounting principles |                                   |                         | (527   
|                                                                                                                                   | Basic earnings (loss) per share   |                         |        
|                                                                                                                                   | Diluted earnings (loss) per share |                         |        
|Income (loss) from discontinued operations                                                                                         |                                   |                         | 18     
|Income (loss) on disposal of discontinued operations                                                                               |                                   |                         | 1,111  
|Total income (loss) from discontinued operations including net gain on disposals                                                   |                                   |                         | 1,129  
|                                                                                                                                   | Basic earnings (loss) per share   |                         |        
|                                                                                                                                   | Diluted earnings (loss) per share |                         |        
|Net income (loss)                                                                                                                  |                                   |                         | 564    
|                                                                                                                                   | Basic earnings (loss) per share   |                         |        
|                                                                                                                                   | Diluted earnings (loss) per share |                         |        
|Balance Sheet Data (end of period):                                                                                                |                                   |                         |        
|Total assets                                                                                                                       |                                   | $                       | 224,564
|Short-term financial liabilities                                                                                                   |                                   |                         | 35,593 
|Long-term financial liabilities                                                                                                    |                                   |                         | 59,754 
|Capital stock                                                                                                                      |                                   |                         | 3,317  
|Stockholders' equity                                                                                                               |                                   |                         | 43,436 
|Other Data:                                                                                                                        |                                   |                         |        
|Weighted average number of shares outstanding                                                                                      |                                   |                         |        
|                                                                                                                                   | Basic                             |                         |        
|                                                                                                                                   | Diluted                           |                         |        

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Dividends

The following table shows the annual dividends we paid on our ordinary shares for the years 1999, 2000, 2001 and 2002. The table also discloses the dividend
amount per ordinary share for 2003 which our supervisory board and our board of management plan to propose to our stockholders. We will ask our stockholders for approval at the annual general meeting
scheduled for April 7, 2004. For each of the years presented, the table shows the dividend amount paid in euros and the dollar equivalent.

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The
table does not reflect tax credits that may be available to German taxpayers who receive dividend payments. If you own our ordinary shares and if you are a United States resident,
please refer to "Taxation" in "Item 10. Additional Information" for a discussion of potential German and United States federal income tax consequences resulting from any dividends you may
receive from us.

Year Ended
December 31,



Dividend Paid
Per Ordinary
Share11999



[EURO]2.35

$
2.202000



2.35


2.102001



1.00


0.882002



1.50


1.622003 (proposed)



[EURO]1.50

$
1.91


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For additional information on our dividends, please refer to the discussion under the heading "Dividend Policy" in "Item 8. Financial
Information."

Exchange Rate Information

The following table shows average, high, low and period-end noon buying rates.

Year

Average1

High

Low

Period-End(in $ per [EURO])1999

1.0588

1.1812

1.0016

1.00702000

0.9207

1.0335

0.8270

0.93882001

0.8909

0.9535

0.8370

0.89012002

0.9495

1.0485

0.8594

1.04852003

1.1411

1.2597

1.0361

1.25972003July



1.1580

1.1164

1.1231August



1.1390

1.0871

1.0986September



1.1650

1.0845

1.1650October



1.1833

1.1596

1.1609November



1.1995

1.1417

1.1995December



1.2597

1.1956

1.25972004January



1.2853

1.2389

1.2452February (through February 13, 2003)



1.2815

1.2426

1.2751


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On February 13, 2003, the noon buying rate for [EURO]1 was $1.2751.

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Fluctuations in the exchange rate between the euro and the dollar will affect the dollar equivalent of the euro price of our ordinary shares on the German stock exchanges. Accordingly,
exchange rate fluctuations are likely to affect the market price of our ordinary shares on the New York Stock Exchange. Exchange rate fluctuations may also affect the amount of any cash dividend we
pay if you receive the dividend in dollars rather than in euros. You can find a more detailed discussion of how you may receive your dividends in dollars under the heading "Memorandum and Articles of
Association  Dividends" in "Item 10. Additional Information."

Please
refer to "Item 5. Operating and Financial Review and Prospects" and "Item 11. Quantitative and Qualitative Disclosures About Market Risk" if you would like to read about the
effect exchange rate fluctuations have on our businesses and operations. In these sections you can also find a discussion of the hedging techniques we use to manage our exposure to exchange rate
fluctuations.

RISK FACTORS

Many factors could affect our financial condition, cash flows and results of operations. We are subject to various risks resulting from changing economic,
political, social, industry, business and financial conditions, particularly in our primary markets, North America and Europe. The principal risks are described below.



A substantial slow-down in economic growth throughout the world could lead to a renewed decline in demand in our primary
markets and, as a result, may significantly adversely affect our profitability and cash flows and delay our strategic expansion plans.

A
renewed decline in consumer demand, in particular in our primary markets, the United States and Western Europe, could significantly adversely affect our profitability and cash flows
and our strategic expansion plans.

A
decline in U.S. domestic demand could cause a significant U.S. automotive industry-wide decline in vehicle sales, and as a consequence, could negatively affect our
commercial vehicles and passenger
car sales in the United States. Several factors could contribute to such a decline. For example, the United States economy requires significant capital inflow from non-U.S. investors to
finance its current account deficit. A pronounced decline in demand for dollar denominated investments, which could be intensified by a further depreciation of the U.S. dollar, could force the United
States to raise its key interest rates, thereby negatively affecting both consumer consumption and capital investment.

A
significant decline in the U.S. economy could also trigger a drop in economic growth in Western Europe and cause a significant reduction in vehicle demand in that market. Vehicle sales
in Germany, a key market for the passenger cars of our Mercedes Car Group and our Mercedes-Benz and Setra commercial vehicles, may be particularly vulnerable to the effects of a renewed
decline in the U.S. economy because of the structural weakness of the German economy and its high dependency on exports.

Since
we derive substantial revenues from the United States and Western Europe, the occurrence of any of these events may significantly adversely affect our future sales, operating
results and cash flows. In addition, international geopolitical and military instability, rising energy prices, the continuing war on terrorism, concern about potential terrorist attacks and fear of a
renewed stock market decline continue to threaten consumer and investor confidence in these and other markets.

A
renewed recession in the Japanese economy could not only reduce sales of passenger cars of our Mercedes Car Group in the Japanese market, but also negatively affect our strategic
partners Mitsubishi Motors Corporation and Mitsubishi Fuso Truck and Bus Corporation.

An
important feature of our long-term strategic plan for growth is our expansion in other Asian markets. An economic decline in Asia, particularly a major economic downturn
in South Korea or China, could delay that expansion. Moreover, deteriorating economic conditions in Asia, especially if coupled with depreciating

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Asian
currencies, could lead Asian competitors with excess capacity to intensify their efforts to export vehicles to North America and Western Europe. This would not only intensify competition for
market share, but also increase further the existing pressure on margins within the automotive industry.

We
also maintain production facilities and sales and finance companies in other regions of the world which may be affected by regional economic and political developments. For example,
in prior years, severe economic recessions in some South American countries (Argentina, Venezuela) also negatively affected neighboring countries, thereby creating uncertainties for the future
development of South American economies in general. These regional uncertainties have the potential to negatively affect our future sales, operating results and cash flows as well as our production
plans in these regions.

The
failure of the World Trade Organization's Ministerial Meeting in Cancun has created uncertainty in the medium term as to when, how and to what extent tariffs and
non-tariff barriers will be eliminated. A shift from multilateralism to regionalism would likely result in additional limitations on the free flow of goods and services. This may have an
increasingly negative impact on our businesses and place additional constraints on the implementation of our global business strategy, thereby potentially affecting our growth prospects and future
profitability and cash flows.

Apart
from general economic conditions, the political environment in the markets in which we operate also affects our sales. More stringent legislation on emissions and fuel consumption,
regulations on energy prices or luxury or other taxes could affect the growth in different product segments, and thus our profitability and cash flows.



Overcapacity and intense competition in the automotive industry, combined with weak global economic conditions may amplify pricing
pressure and force further cost reductions.

Intense
price competition and overcapacity in the automotive industry could force manufacturers of passenger cars and commercial vehicles to decrease production, reduce capacity and
increase sales incentives. These actions would increase our costs and decrease our revenues. Sales incentives in the new vehicle business also influence the price level of used vehicles and thus the
continued use and further increase of sales incentives could result in a decline in resale prices of used vehicles.

Intensifying
competition and increasing pricing pressure could also negatively affect our future profitability if we are unable to continue to provide competitive sales incentives. The
revenues and operating results of the Chrysler Group are particularly sensitive to sales incentives because consumers in the U.S. and Canadian automotive markets have come to expect them. In addition,
sales incentives may become more relevant in West European markets as well. In 2003, retail industry sales (including fleet sales) of new cars and trucks in the United States and Canada decreased
slightly compared to 2002. Sales incentives may have influenced customers to accelerate into 2003 purchases otherwise planned for 2004. In the absence of continued sales incentives, retail industry
sales may decrease significantly in 2004 compared to 2003.

Our future profitability will depend on the ability of the Chrysler Group to improve revenues and reduce costs further.

The
Chrysler Group needs to realize additional revenue enhancement and cost reduction actions, beyond those achieved under its turnaround plan, in order to address overcapacity in the
industry and increased competition in the automotive markets. Our profitability and cash flows will be adversely affected if Chrysler Group is unable to do so.

Our future success depends on our ability to offer new innovative products and meet consumer demand.

Meeting
consumer demand with new vehicles developed over increasingly shorter product development cycle times is critical to the success of automobile manufacturers. Our ability to
strengthen our position within our traditional product and market segments through research and development of innovative products and services while expanding into additional market segments with
innovative new products will play an important

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role
in determining our future success. A general shift in consumer preference towards smaller, lower-margin vehicles, which could result from, among other things, government regulations,
environmental concerns and increasing fuel prices, could have a negative effect on our profitability. Potential delays in bringing new vehicles to market, the inability to achieve defined efficiency
targets without suffering from quality losses and the lack of market acceptance of our new models would adversely affect our financial condition, results of operations and cash flows. This is
especially relevant with respect to the Chrysler Group, which will introduce nine vehicles in 2004.

Service actions or recall campaigns could be costly and hurt sales by creating a negative perception of our vehicles among consumers.

Product
quality significantly influences the consumer's decision to purchase passenger cars and commercial vehicles. Component parts or assembly defects could require us to undertake
service actions or recall campaigns. These actions or campaigns could require us to expend considerable resources in correcting these problems and could influence purchasing decisions of potential
purchasers of our vehicles, thereby negatively affecting our future sales, profitability and cash flows.

In
addition, due to the increasingly competitive market environment, we and other automobile manufacturers may be forced to increase efficiency by further reducing costs along the
automotive value chain which may result in additional cost and pricing pressure on suppliers. Pricing pressure on suppliers, however, may affect product quality.

We are subject to legal proceedings and environmental and other government regulations.

A
negative outcome in one or more of our pending legal proceedings could adversely affect our future financial condition, results of operations and cash flows. Please refer to the
discussion under the heading "Legal Proceedings" in "Item 8. Financial Information" for further information.

The
automotive industry is subject to extensive government regulation worldwide. Laws in various jurisdictions regulate occupant safety and the environmental impact of vehicles,
including emission levels, fuel economy and noise, as well as the levels of pollutants generated by the plants that produce them. The cost of compliance with these regulations could be significant,
and we expect to incur such compliance costs in the future. New legislation may also subject us to additional expense in the future, which could be significant.

Declining used vehicle prices may adversely affect our leasing and sales financing business and our future operating results.

Sales
incentives have become an integral part of sales promotion because of overcapacity in the automotive industry and intense competition and pricing pressure, especially in the North
American automobile market. Sales incentives may also become a more important factor in the West European automobile markets. Because sales incentives have the effect of reducing new vehicle prices,
their continued use means that resale prices of used vehicles and the carrying value of leased vehicles may experience further downward pressure. If resale prices of used vehicles decline, such a
decline will likely adversely affect our future operating results.

A
decline in resale prices of used vehicles could also negatively affect the collateral value of our sales financing and finance lease receivables. In addition, the financial services we
offer in connection with the sale of vehicles involve risks relating to increased cost of capital and consumer and dealer insolvencies. Weakness in the U.S. or European economies may affect our future
credit losses on lease and finance receivables.

Please
refer to "Critical Accounting Policies" in "Item 5. Operating and Financial Review and Prospects" for additional information on how sales incentives could affect our leasing and
sales financing business.

Risks arising from contractual commitments and contingent obligations could affect us adversely.

We
sometimes provide guarantees for third party liabilities, principally in connection with third party liabilities of our non-consolidated affiliated companies, and
performance guarantees related to the contractual performance of joint ventures, non-incorporated companies, partnerships and project groups. These liability

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and
performance guarantees may expose us to financial risk. For example, our subsidiary DaimlerChrysler Services AG is a partner in a consortium that has contracted with the Federal Republic of
Germany to develop, install and operate a system for electronic collection of tolls from all commercial vehicles over 12t GVW using German highways. Toll Collect GmbH, a German limited liability
company in which DaimlerChrysler Services holds a 45% interest, is the principal builder and prospective operator of the system. In the agreement with the Federal Republic of Germany, the consortium
partners and some of their affiliates have undertaken guarantees and other obligations relating to the completion and successful operation of the system. The consortium partners are jointly and
severally liable with respect to most of these guarantees and obligations. The original deadline for completion of the system was August 31, 2003, but technical difficulties have delayed
completion which exposes the consortium partners to financial risk. As a consequence, our future operating results and cash flows may be materially adversely affected by penalties and losses
associated with the delay or losses resulting from a possible termination of the project. For further information concerning this agreement, please refer to the discussion under the heading "Off
Balance Sheet Arrangements  Obligations under guarantees" in "Item 5. Operating and Financial Review and Prospects."



We are exposed to fluctuations in currency exchange rates and interest rates.

Our
businesses, operations and reported financial results and cash flows are exposed to a variety of market risks, including the effects of changes in the exchange rates of the dollar,
the euro and other world currencies. In addition, in order to manage the liquidity and cash needs of our day-to-day operations, we hold a variety of interest rate sensitive
assets and liabilities. We also hold a substantial volume of interest rate sensitive assets and liabilities in connection with our lease and sales financing business. In order to mitigate the impact
of currency exchange rate and interest rate fluctuations, we continually assess our exposures to these risks. When we deem it appropriate, we hedge a portion of these risks through the use of
derivative financial instruments. Nevertheless, changes in currency exchange rates and interest rates can have substantial adverse effects on our operating results and cash flows.

Downgrades of our long-term debt ratings increase our cost of capital and may negatively affect our businesses.

In
October 2003, Standard & Poor's Rating Services lowered our long-term credit rating with an unchanged negative outlook and affirmed our
short-term rating. The lowering of our
long-term rating was primarily due to a more negative outlook for Chrysler Group as a result of tougher competition in the U.S. market. The ratings of Moody's Investors Service for both
our long-term and short-term debt remained unchanged in 2003 compared to 2002.

Downgrades
by rating agencies increase our cost of capital and may negatively affect our businesses, especially our leasing and sales financing business which is typically financed with
a high proportion of debt.

For
a more detailed description of our credit ratings, please refer to the discussion under the heading "Liquidity and Capital Resources" in "Item 5. Operating and Financial Review and
Prospects."

We depend on the issuance of term debt to manage liquidity and declines in our operating performance may limit our ability to issue such
debt.

To
manage the liquidity of the Group, we depend on the issuance of term debt, principally in the U.S. and European capital markets. Declines in our operating performance and changes in
demand for this type of debt instrument could increase our borrowing costs or otherwise limit our ability to fund operations, which would negatively affect our operating results and cash flows.

The carrying value of our equity investments in Mitsubishi Motors Corporation and EADS depends on the ability of those companies to operate their businesses
profitably.

We
hold non-controlling equity interests in Mitsubishi Motors Corporation and in the European Aeronautic and Defence and Space Company EADS N.V. We account for these
investments using the equity method of accounting. Accordingly, risks negatively affecting the profitability of the businesses of these companies may

8

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adversely
affect our proportionate share in their future operating results and our ability to recover the full amount of our investments. For further information on how we account for these
investments, please refer to "Critical Accounting Policies" in "Item 5. Operating and Financial Review and Prospects."

We may need to make significant cash contributions or increase accruals with respect to the funding of our pension and postretirement
plans.

The
funded status of our off-balance sheet pension and postretirement benefit plans is subject to developments and changes in actuarial and other related assumptions.

Actual
developments, such as a significant change in the performance of the investments in plan assets or a change in the portfolio mix of plan assets, can result in corresponding
increases or decreases in the valuation of plan assets, particularly with respect to equity securities. Lower or higher plan assets and a change in the rate of expected return on plan assets can
result in significant changes of the expected return on plan assets in the following year and, as a consequence, could result in higher or lower net periodic pension cost in the following year.

In
addition, pension and postretirement benefit plan valuation assumptions could have an effect on the funded status of our plans. Changes in assumptions, such as discount rates, rates
for compensation increase, mortality rates, retirement rates, health care cost trend rates and other factors, may lead to significant increases or decreases in the value of the respective obligations,
which would affect the reported funded status of our plans and, as a consequence, could negatively affect the net periodic pension cost in the following year.

Please
refer to the discussions under the headings "Critical Accounting Policies" and "Liquidity and Capital Resources" in "Item 5. Operating and Financial Review and Prospects" as well
as to Note 25a to our Consolidated Financial Statements for additional information on pension accounting.

Item 4. Information on the Company.

INTRODUCTION

Organization

The legal and commercial name of our company is DaimlerChrysler AG. It is a stock corporation organized under the laws of the Federal Republic of Germany and was
incorporated on May 6, 1998. Our registered office is at Epplestrasse 225, 70567 Stuttgart, Germany, telephone +49-711-17-0. Our agent for U.S. federal
securities law purposes is DaimlerChrysler North America Holding Corporation, located at 1000 Chrysler Drive, Auburn Hills, MI 48326-2766.

History

On May 7, 1998, Daimler-Benz Aktiengesellschaft and Chrysler Corporation entered into an agreement to combine their businesses. The
stockholders of each company approved the agreement on September 18, 1998. Chrysler became a wholly owned subsidiary of DaimlerChrysler AG through a merger transaction completed on
November 12, 1998. In the merger, Chrysler shareholders received ordinary shares of DaimlerChrysler AG. The combination also involved a contemporaneous exchange offer in which
Daimler-Benz stockholders exchanged more than 98% of their Daimler-Benz ordinary shares for DaimlerChrysler AG ordinary shares. Daimler-Benz was then merged into
DaimlerChrysler AG on December 21, 1998. Accordingly, DaimlerChrysler AG is the successor corporation to Daimler-Benz AG and we comprise the respective businesses, stockholder
groups, managements and other constituencies of Chrysler and Daimler-Benz.

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Business Summary and Developments

We develop, manufacture, distribute and sell a wide range of automotive products, mainly passenger cars, light trucks and commercial vehicles. We also provide
financial and other services relating to our automotive business. We presently have four primary business segments. Our fifth segment, Other Activities, comprises all other businesses and investments
in businesses not allocated to one of our primary business segments. Our segments are:



We
offer our automotive products and related financial services primarily in Europe and in the NAFTA region, which consists of the United States, Canada and Mexico. We also expect to
increase our presence in the Asian markets and have established alliances with Mitsubishi Motors Corporation and Mitsubishi Fuso Truck and Bus Corporation. Approximately 47% of our 2003 revenues
derived from sales in the United States, 17% from sales in Germany and 18% from sales in other countries of the European Union. In line with our strategy of concentrating on the automotive core
business and related services, we disposed of several non-core business assets and expanded our core automotive activities through the transactions described below. For a further
discussion of these transactions and of changes in revenues, please refer to "Operating Results" in "Item 5. Operating and Financial Review and Prospects."

MTU Aero Engines.On December 31, 2003, we sold MTU Aero Engines GmbH and its subsidiaries to the investment company
Kohlberg, Kravis and Roberts & Co. Ltd. (KKR) for [EURO]1,450 million, consisting of [EURO]1,052 million in cash and net debt of [EURO]398 million being assumed. We
further agreed to provide a vendor loan to KKR in the amount of [EURO]175 million, reducing our cash proceeds from the transaction to [EURO]877 million. The sale of MTU Aero Engines also
triggered a compensation payment of $250 million to United Technologies Corporation, the parent company of Pratt & Whitney, which we paid in January 2004. This compensation
payment released us from financial obligations, which we had undertaken in order to facilitate a pre-existing strategic alliance between MTU Aero Engines and Pratt & Whitney. As
required by U.S. GAAP, we reclassified and are reporting the results of MTU Aero Engines and the gain on the sale of this business as discontinued operations in our consolidated statements of income
(loss). We have adjusted our consolidated statements of income (loss) for all periods presented to reflect this presentation.

MFTBC.In January 2003, Mitsubishi Motors Corporation (MMC) spun off its "Fuso Truck and Bus" division, creating
Mitsubishi Fuso Truck and Bus Corporation (MFTBC). In March 2003, we (DaimlerChrysler AG) acquired from MMC a non-controlling 43% interest in MFTBC for [EURO]764 million in
cash. Ten Mitsubishi Group companies, including Mitsubishi Corporation, Mitsubishi Heavy Industries and Bank of Tokyo-Mitsubishi, entered into a separate share sale and purchase agreement with MMC
pursuant to which they agreed to purchase from MMC a total of 15% of MFTBC's shares for approximately [EURO]266 million in cash. MMC retained a 42% interest in MFTBC. We have accounted for our
non-controlling equity interest in MFTBC using the equity method of accounting. On January 15, 2004, we agreed to acquire from MMC an additional 22% interest in MFTBC for
approximately [EURO]0.4 billion in cash. We expect to consummate the transaction in March 2004, once we have received all applicable governmental approvals, and to consolidate MFTBC in
our financial statements in the second quarter of 2004. Following completion of the transaction, MMC will hold 20% and we will hold 65% of MFTBC.

10

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HMC.In June 2001, we (DaimlerChrysler AG) entered into a commercial vehicle joint venture agreement with Hyundai
Motor Company (HMC). In a first phase, we and HMC established DaimlerHyundai Truck Corporation (DHTC), of which we and HMC each own 50%. We formed DHTC to produce and distribute engines and engine
parts. We are currently proceeding towards the production start which we anticipate will be in mid-2004. The commercial vehicle joint venture agreement with HMC also included an option for
us to acquire 50% of the commercial vehicle business of HMC for approximately [EURO]400 million. Pursuant to this option, which we exercised in December 2002, it is intended that HMC
would contribute its entire commercial vehicle business into a new legal entity. Discussions regarding the establishment of the commercial vehicle joint venture between us and HMC are ongoing and the
establishment of the joint venture is therefore still tentative. We continue to hold a 10% equity interest in HMC.

Global Engine Alliance.DaimlerChrysler Corporation, Hyundai Motor Company, and Mitsubishi Motor Company have (directly or
through wholly owned subsidiaries) formed joint ventures to develop and engineer through Hyundai, and jointly manufacture (in the United States) a family of world-class in-line four
cylinder gasoline engines. Each of the three companies will utilize the same base engine in some of its future vehicles and will work with the other two to reduce the cost of the engine, improve
quality and maximize production efficiencies. Hyundai and Mitsubishi will manufacture engines in production facilities in Korea and Japan, respectively, while the joint ventures will own and operate
the production facility in the United States. The first company to manufacture the engine will be Hyundai, which plans to begin production in 2004. Engine production is scheduled to commence in the
United States for Chrysler in 2005 and for Mitsubishi in 2006.

Sale of capital services portfolios.In an effort to refocus our financing and leasing portfolios on the automotive sector,
which is our core business, we disposed of several non-automotive financial assets in 2002 and 2003. Most importantly, during 2002 we sold substantial portions of our commercial real
estate and asset-based lending portfolios to GE Capital and other financial services providers for an aggregate amount of [EURO]1.3 billion. In October 2002, we concluded further
agreements to sell additional portions of our capital services portfolio. We completed these sales in 2003 for proceeds of [EURO]0.3 billion.

Sale of debis Systemhaus.In October 2000, our subsidiary DaimlerChrysler Services AG combined its information
technology activities with those of Deutsche Telekom AG in a joint venture. As part of the transaction, Deutsche Telekom contributed [EURO]4.6 billion in cash to our information technology
subsidiary debis Systemhaus in exchange for a 50.1% controlling interest in that company. In 2001, debis Systemhaus was renamed T-Systems ITS. In January 2002, we exercised our
option to sell our 49.9% interest in T-Systems ITS to Deutsche Telekom for [EURO]4.7 billion. We consummated the sale in March 2002.

Sale of Temic.In April 2001, we sold a 60% interest in TEMIC TELEFUNKEN microelectronic GmbH (now known as Conti
Temic microelectronic GmbH) and its subsidiaries to Continental AG for proceeds of [EURO]398 million. The sale agreement provided Continental with the option to purchase our 40% interest, and
gave us the option to sell our 40% interest to Continental. On April 1, 2002, we exercised our option and sold our 40% interest to Continental for [EURO]215 million.

Sale of Rail Systems.In April 2001 we sold DaimlerChrysler Rail Systems GmbH to Bombardier Inc. for
$725 million. A dispute regarding this transaction is currently in arbitration before the International Chamber of Commerce, Paris. For further information about this dispute, please refer to
"Other Information  Legal Proceedings" in "Item 8. Financial Information" and to Note 30 to our Consolidated Financial Statements.

For
additional information on acquisitions and dispositions of businesses during the last three years, please refer to Note 4 to our Consolidated Financial Statements.

11

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Seasonality.There generally is no material seasonal impact on our business. To the extent that we do experience some
seasonal fluctuation in our businesses, it has mainly occurred in our Chrysler Group segment in the third quarter and primarily is the result of the annual two to three week summer shut down of that
segment's manufacturing facilities during that quarter. Consequently, Chrysler Group's operating results for the third quarter tend to be less favorable than those of the other quarters.

Net
loss from continuing operations was [EURO]0.4 billion in 2003 compared to a net income from continuing operations of [EURO]4.8 billion in 2002. Basic and diluted loss
per ordinary share (from continuing operations) was [EURO]0.41 in 2003, compared to basic and diluted earnings per ordinary share of [EURO]4.76 and [EURO]4.74 in 2002.

Total
net income was [EURO]0.4 billion in 2003 compared to total net income of [EURO]4.7 billion in 2002. Basic and diluted earnings per ordinary share were [EURO]0.44 in
2003, while in 2002 basic and diluted earnings per ordinary share were [EURO]4.68 and [EURO]4.67.

For
additional information on our financial performance, please refer to "Item 3. Key Information" and "Item 5. Operating and Financial Review and Prospects."

Our
aggregate capital expenditures for property, plant and equipment were [EURO]6.6 billion in 2003, [EURO]7.1 billion in 2002 and [EURO]8.9 billion in 2001. In
2003, the United States and Germany each accounted for 41% of these capital expenditures. Expenditures on operating leases were [EURO]15.6 billion in 2003, less than in the prior years (2002:
[EURO]17.7 billion; 2001: [EURO]18.0 billion). For information on our capital expenditures by business segment, please refer to "Description of Business Segments" below.

As
of December 31, 2003, we had 1,012,824,191 ordinary shares outstanding and approximately 1.8 million stockholders. Our ordinary shares trade on various stock exchanges
throughout the world, including the Frankfurt Stock Exchange and the New York Stock Exchange.

Significant Subsidiaries

The following table shows the significant subsidiaries we owned, directly or indirectly, as of December 31, 2003:

|Name of Company                                                                             |                                                                                            | Percentage
Owned
|------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | ----------------
|DaimlerChrysler North America Holding Corporation, Auburn Hills, MI, a Delaware corporation |                                                                                            | 100.0           
|                                                                                            | DaimlerChrysler Motors Company LLC, Auburn Hills, MI, a Delaware limited liability company |                 
|                                                                                            |                                                                                            |                 
|                                                                                            |                                                                                            |                 
|DaimlerChrysler North America Finance Corporation, Newark, DE, a Delaware corporation       |                                                                                            | 100.0           

DaimlerChrysler
AG owns 100% of DaimlerChrysler North America Holding Corporation. DaimlerChrysler North America Holding Corporation owns 100% of DaimlerChrysler Motors Company LLC and
100% of DaimlerChrysler North America Finance Corporation. DaimlerChrysler Motors Company LLC owns 100% of DaimlerChrysler Corporation. DaimlerChrysler Corporation owns 100% of DaimlerChrysler
Services North America LLC.

12

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DESCRIPTION OF BUSINESS SEGMENTS

Mercedes Car Group

The Mercedes Car Group designs, produces and sells Mercedes-Benz passenger cars, Maybach high-end luxury sedans and smart compact
passenger cars. In 2003, the Mercedes Car Group contributed approximately 38% of our revenues.

Mercedes-Benz.Our Mercedes-Benz passenger cars are world renowned for their
innovative technology, highest levels of comfort, quality, safety, and pioneering design. Availability of individual models may differ by geographic market. The Mercedes-Benz passenger car
product range consists of the following classes:

S-Class.S-Class full-size luxury sedans range from the S 350 to the S 600. In addition
to various gasoline-powered models, two diesel engine versions with common-rail technology - the S 320 CDI and the S 400 CDI - and three models with
permanent all-wheel drive - the S 350 4MATIC, the S 430 4MATIC and the S 500 4MATIC - are currently available. A sportier version, the S 55 AMG completes the
line-up.

The
CL-Class is a top-of-the-line coupe derived from the S-Class platform. The CL coupes combine superior driving performance,
comfort and state-of-the-art technology. Customers can choose among three models - the CL 500, the CL 600, and the CL 55 AMG.

Our
renowned SL models are available in four variants, namely the SL 350, the SL 500, the SL 600 and the SL 55 AMG. They all feature an all-new body style and several
technological innovations, including a retractable hard top, an electronic braking system, and an active suspension system.

We
expect to introduce a new high performance Mercedes-Benz sports car, the SLR, in the first half of 2004. McLaren Cars Ltd., a subsidiary of TAG McLaren
Holding Ltd., will produce the SLR. Through one of our German subsidiaries, we hold a 40% interest in TAG McLaren Holding Ltd.

E-Class.The E-Class is a line of luxury sedans and station wagons. E-Class sedans are
available in five gasoline engine versions ranging from the E 200 to the E 55 AMG and five common-rail diesel engine versions. Three models are also available with permanent
all-wheel drive  the E 240 4MATIC, the E 320 4MATIC and the E 500 4MATIC. We introduced the new E-Class station wagon in March 2003 in Western Europe and in
September 2003 in the United States. They are available in five gasoline engine versions, ranging from the E 200 Compressor to the E 55 AMG, and in three common rail diesel engine versions. Our
permanent all-wheel drive 4MATIC is available in three of the five gasoline engine versions.

We
expect to introduce a new four-door coupe, the CLS, at the end of 2004. The CLS is an innovative vehicle concept with a highly emotive design and leading-edge
technology.

C-Class.The C-Class is a line of compact luxury sedans and station wagons. Seven gasoline engine
versions - ranging from the C 180 to the C 32 AMG - and four common-rail diesel engine versions are available. Two models come with permanent all-wheel
drive - the C 240 4MATIC and the C 320 4MATIC. The C-Class sports coupe, the SLK-Class (a two-seat roadster), the CLK coupe, and the CLK convertible
complement the C-Class product family. In the spring of 2004, we will introduce a significantly revised C-Class including numerous additional features that will add value for our
customers.

We
introduced the new version of the CLK convertible in the European market in May 2003 and in September 2003 in the United States. We expect to introduce an
all-new version of the SLK in the first quarter of 2004 in Western Europe and in the fourth quarter of 2004 in the United States.

A-Class.The A-Class is a front-wheel drive four-door hatchback that comes in a short and
a long wheelbase version. Customers can choose from four gasoline engines of varying displacements and two diesel engines with common-rail technology. We will introduce an
all-new version of the A-Class in the third quarter of 2004. We do not offer the current A-Class in the United States.

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M-Class.The M-Class is a line of sport-utility vehicles with permanent all-wheel-drive.
They combine off-road capabilities with the comfort of a passenger car. We offer two diesel engine versions - the ML 270 CDI and the ML 400 CDI - and three gasoline
engine versions - the ML 350, ML 500 and ML 55 AMG.

G-Class.The G-Class is a four-wheel drive cross-country vehicle that has been
consistently successful in its market segment since it was introduced in 1979. It comes in a short and a long wheelbase version and is also available as a convertible. We currently offer three
gasoline engine models and two common-rail diesel engine models. Since December 2001, we have been offering the long wheelbase version of the G 500 in the United States.

Maybach.The prestigious Maybach brand represents a line of exclusive high-end luxury
sedans with unsurpassed luxury, comfort, and individuality.

We
introduced the first Maybach sedans in the summer of 2002. Two models are currently available, the Maybach 57 and the Maybach 62, which has a 50 cm (19.7 inches) longer wheelbase than
the Maybach 57. Customers can customize their vehicles by choosing from an extensive selection of the finest interior furnishings and materials.

smart.In 2003, we transformed smart into a multi-product brand. Smart offers its stylish design in
an entire product family focused on urban mobility and optimum use of resources. In addition to the original city-coupe, which is also available as a convertible and as a limited edition
lifestyle version, the crossblade, we launched a roadster version in the spring of 2003. Customers can choose between a roadster and a coupe derivative. In April 2004 we plan to launch the
smart forfour, a new four-seat model. We expect to offer select future smart models in the United States beginning in 2006.

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In 2003, the main markets for our Mercedes Car Group were Germany (32% of unit sales), the remainder of Western Europe (35% of unit sales), the United States (18%
of unit sales) and Japan (4% of unit sales). In Germany, new passenger car registrations for all manufacturers reached 3.24 million units, 0.5% less than in the previous year. In Western Europe
(excluding Germany), new registrations of passenger cars decreased 1.5% to 10.98 million units.

The
following table shows the distribution of revenues and unit sales for our Mercedes Car Group segment by geographic market since 2001:

Revenues and Unit Sales

Year Ended December 31,2003

% change

2002

% change

2001Revenues1Western Europe

31,558

+2

30,940

+6

29,226Germany

16,875

-1

16,975

+3

16,433Other

14,683

+5

13,965

+9

12,793NAFTA region

11,848

-3

12,173

+2

11,891United States

10,932

-3

11,257

+2

11,034Canada and Mexico

916

0

916

+7

857Asia

5,100

+9

4,694

+11

4,236Japan

2,399

-2

2,438

+14

2,139Other

2,701

+20

2,256

+8

2,097Other markets

2,940

+24

2,363

+0

2,352World

51,446

+3

50,170

+5

47,705UnitsWestern Europe

812,900

-3

835,900

0

838,800Germany

390,100

-6

417,000

-4

436,500Other

422,800

+1

418,900

+4

402,300NAFTA region

235,400

+2

231,800

+1

229,400United States

218,400

+2

213,700

0

213,400Canada and Mexico

17,000

-6

18,100

+13

16,000Asia

96,000

+2

94,100

0

93,800Japan

45,800

-3

47,100

-2

48,100Other

50,200

+7

47,000

+3

45,700Other markets

72,600

+3

70,500

+4

67,700World

1,216,900

-1

1,232,300

0

1,229,700


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In 2003, worldwide unit sales of the Mercedes Car Group were slightly lower than in 2002, while revenues increased 3% compared to the prior year.
Unit sales reached 1,216,900 units compared to 1,232,300 in the previous year. Sales of the new E-Class sedan were particularly strong at 254,100 units while the entire E-Class
family achieved sales of 305,300 units. The S-Class family continued to perform strongly and achieved sales of 108,800 units.

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In
Germany, unit sales of our Mercedes Car Group reached 390,100 in 2003, a 6% decrease compared to the previous year. Unit sales in Western Europe (excluding Germany) increased 1% to
422,800 units. In the United States, the most important non-European market for Mercedes-Benz passenger cars, sales reached 218,400 units, a 2% increase over the previous year.
The continued strong sales performance of the successful S-Class family and the new E-Class station wagon and CLK convertible supported this result. Unit sales in Japan fell 3%
to 45,800 units in a very difficult market. In the rest of Asia (excluding Japan), we were able to surpass last year's sales level by 7% at 50,200 units. Sales performance in emerging markets such as
China was especially encouraging with an increase of more than 33%. For a discussion of changes in revenues, please refer to "Operating Results" in "Item 5. Operating and Financial Review and
Prospects."

In
Western Europe, our Mercedes-Benz passenger cars principally compete with products of BMW (BMW and, since January 2003, Rolls Royce), Volkswagen (Audi, Bentley, VW)
and, depending on the market segment, Fiat (Lancia, Alfa Romeo, Ferrari, Maserati), Ford (Jaguar, Aston Martin, Land Rover, Volvo), General Motors (Opel, Saab, Vauxhall), Porsche, PSA
(Peugeot/Citroen), Renault and Toyota (Lexus). In the United States, our principal competitors include BMW (BMW, Rolls Royce), Ford (Jaguar, Aston Martin, Land Rover, Lincoln, Volvo), Honda (Acura),
Nissan (Infiniti), Porsche, Toyota (Lexus), Volkswagen (Audi, Bentley, VW) and, depending on the market segment, Nissan, Toyota and certain models produced by General Motors (Cadillac, Saab).
Competitors of Maybach are Rolls Royce and Bentley sedans. Principal competitors of the smart are Fiat, Ford, PSA (Peugeot/Citroen), Renault, Suzuki, Toyota (Daihatsu), BMW (New Mini) and Volkswagen
(Seat, Skoda, VW).

The
following table shows, by vehicle line, the number of units sold since 2001:

Year Ended December 31,2003

2002

2001UnitsS-Class (including CL-Class, SL-Class and Maybach)

108,800

107,100

106,500E-Class

305,300

242,300

201,400C-Class (including CLK-Class and SLK-Class)

442,100

478,300

506,700A-Class

147,400

171,500

190,600M-Class

81,200

102,000

102,300G-Class

7,400

8,800

6,000Smart

124,700

122,300

116,200Total

1,216,900

1,232,300

1,229,700


---



We distribute Mercedes-Benz passenger cars through a worldwide distribution system covering 200 countries and customs areas. The sales organization
differs by geographic market depending on local needs and requirements. At the wholesale level, we distribute Mercedes-Benz passenger cars through affiliated or independent general
distributors or through wholly-owned subsidiaries. In the United States, in Canada and in major European markets we operate our own wholesale subsidiaries which we call market performance centers.
Recently, we established market performance centers in Korea and Malaysia. In Europe and Canada, we also operate an increasing number of retail outlets, and are in the process of establishing our own
retail locations in select major European metropolitan areas.

We
distribute our Maybach luxury vehicles through exclusive Maybach centers in Europe and Asia and selected Mercedes-Benz dealers in the United States. The Maybach centers
are outposts of our newly opened Center of Excellence at our largest passenger car production plant in Sindelfingen, Germany. We entrust the

16

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responsibility
of caring for our Maybach customers only to specially trained personal liaison managers. These managers are not only knowledgeable in all technical details relating to Maybach vehicles,
but are also intimately familiar with the demanding lifestyles of our customers which enables them to provide a maximum level of support. In the future, in addition to the Maybach distribution
centers, customers will also be able to call on several specialized service centers.

A
network of approximately 650 smart centers in 31 countries provides sales and repair services for our smart vehicles.

Effective
October 2002, the European Commission adopted revised legislation concerning automotive retailing and services in the European Union. The new legislation no longer
permits territorial and brand exclusivity in automotive distribution agreements. Under the new law, independent repair shops may become authorized service partners if they meet the qualitative
criteria established by the manufacturer. Beginning in October 2005, authorized automotive retailers have the right to establish additional sales outlets anywhere in the European Union. In
light of the new legislation, we concluded new contracts with our retail partners. The new contracts establish binding qualitative standards, which we intend to enforce through audits at regular
intervals.



Our Mercedes Car Group spent [EURO]2.9 billion on capital expenditures for fixed assets in 2003. Principal areas of investment were the preparation for
production of the successor models of the A-Class, the M-Class, the S-Class and the SLK-Class, and the new E-Class coupe CLS as well as the
new cross-over model GST. Capital expenditures also included production equipment for manufacturing new engines and transmissions. In 2003, research and development activities of the
Mercedes Car Group related primarily to the development of new car models and new engines and transmissions. The new car models under development included the successor model of the
S-Class, the successor models and some new derivatives of the A-Class and M-Class, and the new smart SUV. The following table shows the capital expenditures for
fixed assets and the research and development expenditures of the Mercedes Car Group segment during the last three years:

Year Ended December 31,2003

2002

2001([EURO] in millions)Capital expenditures for fixed assets

2,939

2,495

2,061Research and development

2,687

2,794

2,402


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Chrysler Group

Our Chrysler Group segment consists of DaimlerChrysler Motors Company LLC and its subsidiaries DaimlerChrysler Corporation, DaimlerChrysler Canada Inc.,
and DaimlerChrysler de Mexico S.A. de C.V., and
other international automotive affiliates. These companies manufacture, assemble and sell cars and trucks under the brand names Chrysler, Jeep® and Dodge. The Chrysler Group segment
contributed approximately 36% of our revenues in 2003.



The Chrysler Group continued to make progress in 2003 with respect to a number of key initiatives announced in February 2001 as part of a
three-year turnaround plan designed to improve the Chrysler Group's operating and financial performance. Turnaround plan initiatives, such as reductions of costs of materials, new
performance-based dealer incentive programs, workforce reductions and manufacturing efficiencies, helped the Chrysler Group to improve significantly its cost structure, product quality, and
manufacturing productivity.

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Revenue
improvements from the turnaround plan were lower than anticipated. However, the Chrysler Group has overachieved cost savings through its successful cost reduction programs and was able to
offset partially the negative impact on revenues resulting from the intensely competitive North American automotive market.

The
Chrysler Group is the most improved company in The Harbour Report North America 2003, with an overall improvement of 8.3% in manufacturing productivity (labor hours per vehicle) in
2002 compared to 2001. This improvement is the second highest in the history of The Harbour Report, an annual study published by an independent automotive research and consulting firm. In addition,
the quality of Chrysler Group vehicles continued to improve as indicated by a 3% improvement in the J.D. Power and Associates 2003 Initial Quality Study.SM

In
order to build on turnaround plan accomplishments, the Chrysler Group is pursuing a strategic transformation plan through 2007 that focuses on the following areas:





The Chrysler Group designs, manufactures and sells vehicles under the Chrysler, Jeep® and Dodge brand names. The Chrysler and Dodge brands offer
full-size, mid-size and compact cars and standard and extended wheelbase minivans. Additionally, the Chrysler brand offers the Pacifica in the all-new sports tourer
segment and the PT Cruiser. The Dodge brand also includes full-size and mid-size pick-up trucks, a sport-utility vehicle and full-size vans. Under the
Jeep® brand, the Chrysler Group sells full-size, mid-size and compact sport utility vehicles. These vehicles are sold in the NAFTA region and some vehicles are also
sold in markets outside of NAFTA.

In
addition to producing and selling cars and trucks, the Chrysler Group also provides its customers with parts and accessories marketed under the MOPAR® brand name.

2003 Product Introductions.In 2003, the Chrysler Group introduced the following new products:



The
all-new 2004 Chrysler Pacifica sports tourer has front and rear first-class seating, three rows of seats with room for up to six passengers, and various amenities that
provide alternatives to existing luxury and sport utility vehicles.

The
all-new 2004 Chrysler Crossfire sports coupe is powered by a Mercedes-Benz 3.2-liter V-6 engine. The two-seater Crossfire
is a combination of American design and German engineering.

The
all-new 2004 Dodge Durango is a large sport utility vehicle with the ability to tow 8,950 lbs. and seat seven passengers. Dodge Durango has a new trio of powertrains that
deliver improved fuel efficiency, including an available 5.7-liter HEMI® Magnum V-8.

18

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2004 Product Introductions.In 2004, the Chrysler Group plans to introduce the following nine products:



The
2005 Chrysler 300 Series, the Chrysler Group's newest four-door sedan, and the 2005 Dodge Magnum sports tourer are a return to rear-wheel drive in the spring
of 2004. These vehicles will also be offered with a 5.7-liter HEMI® Magnum V-8, all-speed traction control, an electronic stability program and
anti-lock brakes.

With
the 2005 Chrysler Crossfire Roadster and the 2005 Chrysler PT Cruiser Convertible we will add two new convertible models in 2004. Chrysler Group's new 2005 Chrysler Town &
Country and 2005 Dodge Caravan minivans available in early 2004 will offer more than fifteen new features and safety enhancements. Among the available options is Stow n' Go seating which
gives customers the ability to easily fold their second- and third-row seats into the floor and conveniently stow items.

The
2005 Dodge Dakota pick-up will be available in mid-2004. It will continue to offer the only V-8 engine in the mid-size
pick-up truck market. The new 2004 Dodge Ram SRT-10 is powered by the Viper V-10 engine with 500 horsepower and 525 lb.-ft of torque.

The
2005 Jeep® Grand Cherokee, a full-sized sport utility vehicle, will continue the tradition of Jeep® innovation with new technologies,
sophisticated all-new Jeep® design and a new dimension in on-road refinement and off-road capability. The new 2004 Jeep® Wrangler Unlimited
will deliver 13 inches more cargo space and two inches more second row leg room. Wrangler Unlimited also features towing capacity of 3,500 lbs. due to its 10-inch longer wheel base.

19

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In 2003, our most important markets for Chrysler, Jeep® and Dodge vehicles were the United States with 81% of factory shipments or unit sales, Canada
with 9% of unit sales and Mexico with 4% of unit sales. In the United States and Canada we sold 2,340,400 vehicles in the retail market in 2003, which compares to 2,452,200 in 2002. For 2003, this
represents a 12.6% share of the United States and Canada car and truck market, compared to 13.0% in 2002. Industry retail sales in the United States and Canada for 2003 were 18.6 million units,
a decrease of 2% from 2002.

The
following table shows the distribution of revenues and unit sales for the Chrysler Group segment by geographic market since 2001:

Revenues and Unit Sales

Year Ended December 31,2003

% change

2002

% change

2001Revenues1NAFTA region

45,044

-19

55,304

-5

58,210United States

39,863

-19

48,958

-5

51,548Canada

3,949

-14

4,595

+1

4,529Mexico

1,232

-30

1,751

-18

2,133European Union

2,807

-10

3,122

-12

3,546Other markets

1,470

-16

1,755

+2

1,727World

49,321

-18

60,181

-5

63,483Units2NAFTA region

2,457,800

-7

2,650,700

+3

2,569,600United States

2,128,600

-7

2,277,100

+4

2,196,000Canada

229,000

-10

253,800

+5

240,600Mexico

100,200

-16

119,800

-10

133,000European Union

99,900

+19

84,100

-20

105,100Other markets

80,200

-9

87,900

+8

81,200World

2,637,900

-7

2,822,700

+2

2,755,900


---

---

In 2003, revenues of our Chrysler Group segment decreased, primarily as a result of the appreciation of the euro against the dollar, higher sales
incentives and lower unit sales. Total unit sales decreased by 7% to 2,637,900 primarily as a result of intense competition in the NAFTA market. For additional information regarding Chrysler Group's
revenues, please refer to "Operating Results" in "Item 5. Operating and Financial Review and Prospects."

In
the NAFTA region, principal competitors of our Chrysler, Jeep® and Dodge passenger cars and trucks are products of General Motors, Ford, Toyota, Honda and Nissan. Intense
competition in the NAFTA region is likely to continue as Korean manufacturers offer additional value-based products, Asian manufacturers offer pick-up trucks and European manufacturers
offer sport-utility vehicles. Competition will continue to intensify as new capacity in NAFTA is added by Asian and European manufacturers.

20

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The
following table shows, by vehicle line, the number of units sold since 2001:

Year Ended December 31,2003

2002

2001Units1CarsNeon

153,600

171,600

188,400Sebring and Stratus Sedans

159,800

201,000

203,600Intrepid, Concorde and 300M2

140,900

202,200

200,000Other

113,400

109,000

105,900Minivans

476,800

558,800

591,600Pacifica

82,000



PT Cruiser

136,400

191,200

214,300TrucksRam Pick-up

508,300

466,500

375,900Dakota

122,500

161,700

163,100Durango

113,300

122,200

132,600Ram Van

20,100

42,000

57,500Sprinter

9,300



Other

5,300

900

Jeep®Grand Cherokee

255,100

289,000

249,900Liberty/Cherokee

256,700

230,100

201,300Wrangler

84,400

76,500

71,800Total

2,637,900

2,822,700

2,755,900


---

---



Dealers in the NAFTA region, who have sales and service agreements with DaimlerChrysler Motors Company LLC, sell new Chrysler, Jeep® and Dodge
passenger cars and trucks and MOPAR® parts and accessories at retail. The dealers purchase cars, trucks, MOPAR® parts and accessories from DaimlerChrysler Motors Company LLC
for sale to retail customers. In 2003, the Chrysler Group completed the first year of "Project Alpha," a new style of dealership in key markets that combines in one modern facility the display, sale
and servicing of all three brands of Chrysler Group vehicles (Chrysler, Jeep® and Dodge). Approximately 100 new Alpha dealerships were created.

In
the United States, we distribute our Chrysler, Jeep® and Dodge products through 4,115 dealers at December 31, 2003, compared to 4,234 dealers at December 31,
2002. In Canada, the dealer network comprised 502 dealers at December 31, 2003, compared to 512 dealers at December 31, 2002. In Mexico, the dealer network comprised 122 dealers at
December 31, 2003, compared to 124 dealers at December 31, 2002.

Chrysler
International Corporation, a wholly owned subsidiary of DaimlerChrysler Corporation which in turn is a wholly owned subsidiary of DaimlerChrysler Motors Company LLC, sells
vehicles in various other countries through wholly-owned, affiliated and independent distributors and dealers.

21

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In 2003, our Chrysler Group segment invested [EURO]2.5 billion in fixed assets. These capital expenditures related primarily to new product programs that
include the 2003 launch of the Dodge Durango sport utility, and early and mid-2004 launches of the Chrysler and Dodge minivans including Stow n Go seats, Chrysler
300 Series, Jeep® Grand Cherokee, and Dodge Dakota. In addition, Chrysler Group made capital expenditures to upgrade powertrains, enhance flexible manufacturing capabilities and maintain
existing facilities.

Research
and development expenditures in 2003 were primarily for new product development, but also included development costs for improving quality, vehicle stability and drivability of
existing products. These expenditures included compliance costs associated with regulations promulgated by various governmental agencies worldwide.

The
following table shows the capital expenditures for fixed assets and the research and development expenditures of the Chrysler Group segment during the last three years:

Year Ended December 31,2003

2002

2001([EURO] in millions)Capital expenditures for fixed assets

2,487

3,155

5,083Research and development

1,689

2,062

2,201


---

The decrease of capital expenditures for fixed assets from 2002 to 2003 is mainly attributable to the appreciation of the euro against the dollar,
global sourcing and more efficient spending. The decrease of research and development expenditures is attributable to the appreciation of the euro against the dollar.



The Chrysler Group's international operations in South America include a manufacturing facility in Venezuela, where it assembles the Chrysler Neon,
Jeep® Cherokee and Jeep® Grand Cherokee.

International
cooperations in Austria include the production of Jeep® Grand Cherokees and the transferred production of Chrysler Voyagers under an assembly contract with
Magna Steyr Fahrzeugtechnik AG & Co KG. In Brazil, the segment participates in a joint venture with Bayerische Motoren Werke AG to manufacture a 1.6-liter gasoline engine for use in
both Chrysler Group and BMW vehicles. DaimlerChrysler Corporation also has a minority interest in a company that assembles Jeep® Cherokees and long wheelbase Jeep® Wranglers in
Egypt.

The
segment's automotive affiliations in the Asia-Pacific region include the assembly and distribution of Jeep® Cherokees and Jeep® Grand Cherokees in
China by Beijing Jeep® Corporation, Ltd., a minority-owned joint venture. Beijing Jeep® also assembles the Mitsubishi Pajero and Outlander for sale in China.

In
the first quarter of 2003, production of the Chrysler Crossfire two-seat coupe began in Germany under an assembly contract with Wilhelm Karmann GmbH, one of our
long-time business partners. In 2004, production of the Chrysler Crossfire SRT-6, a derivative of the Chrysler Crossfire, and Chrysler Crossfire convertible will begin.

DaimlerChrysler
Corporation and Mitsubishi Motors Corporation have agreed to work together on several projects to share research and development costs and to combine purchasing volumes,
where possible.

DaimlerChrysler
Corporation, Hyundai Motor Company, and Mitsubishi Motor Company have (directly or through wholly owned subsidiaries) formed joint ventures to develop and engineer
through Hyundai, and jointly manufacture (in the United States) a family of world-class in-line four cylinder gasoline engines. Each of the three companies will utilize the same base
engine in some of its future vehicles and will work with the

22

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other
two to reduce the cost of the engine, improve quality and maximize production efficiencies. Hyundai and Mitsubishi will manufacture engines in production facilities in Korea and Japan,
respectively, while the joint ventures will own and operate the production facility in the United States. The first company to manufacture the engine will be Hyundai, which plans to begin production
in 2004. Engine production is schedule to commence in the United States for Chrysler in 2005 and Mitsubishi in 2006.

Commercial Vehicles

We manufacture and sell commercial vehicles under the brand names Mercedes-Benz, Freightliner, Sterling, Setra, Thomas Built Buses, American La
France, Western Star and Orion. Our worldwide facilities provide us with a very strong production and assembly network for commercial vehicles and core components. We distribute our commercial
vehicles through a worldwide distribution and service network. In 2003, our Commercial Vehicles segment contributed approximately 21% of our total revenues.



In the NAFTA region, we operate our truck business through our U.S. subsidiary, Freightliner LLC. During 2003, Freightliner continued to carry out its
four-point turnaround plan we announced in October 2001. By the end of 2003, we had implemented measures with a sustainable savings volume of over $850 million per year, the
target we had planned to achieve in 2004. Consequently, we are nearly one year ahead of the original cost savings schedule and we expect to exceed the original savings target in 2004.

The
final status of the four main elements of the turnaround plan is as follows:



Given
this successful implementation of the turnaround plan, we closed the project at year-end 2003. The individual line functions and business units will follow up on
remaining initiatives in 2004.

23

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Vans.Worldwide, we currently offer four series of Mercedes-Benz vans between 1.9 metric tons (t) and 7.5t
gross vehicle weight (GVW): the Sprinter, the Vito/Viano  successor of the Vito/V-Class , the Vario and the compact multi-purpose vehicle Vaneo. We
introduced the Vito/Viano in September 2003 in select Western European markets and plan to introduce the vehicle in select other markets worldwide. We manufacture Mercedes-Benz vans
in Germany and Spain for all markets, except South America, South Africa, Australia and several Asian markets. For the
South American, South African, Australian, and several Asian markets, we manufacture the Mercedes-Benz Sprinter in Argentina. We also assemble the Sprinter van in the United States for the
U.S. and Canadian markets where we currently sell it under the Freightliner and Dodge brand names. We sell the Dodge Sprinter in these markets through Chrysler Group dealers in an effort to broaden
the Sprinter's customer base. We currently do not sell the Vito/Viano, the Vario and the Vaneo in the United States.

Trucks.Our current European Mercedes-Benz truck lines consist of the Actros in the heavy weight category, the
Atego in the medium and heavy weight categories, the Axor and the Econic. The Axor is a semi-trailer truck we launched in 2002. In terms of price and function, we positioned it between the
Actros and the Atego. The Econic is a specialty vehicle that customers can adapt for a variety of applications. Complementing our line-up is the Unimog, a four-wheel drive
vehicle designed for special purpose applications, such as street maintenance, some construction industry uses, fire-fighting, forestry and agriculture.

We
launched the 2002 new Mercedes-Benz Actros in March 2003 and a new Unimog series in May 2003. To complete our truck portfolio we introduced a new light truck
line, the Accelo, in 2003, mainly for the South American markets.

In
Turkey, we manufacture medium and heavy duty trucks mainly for the local market. Our subsidiary DaimlerChrysler do Brasil develops and produces Mercedes-Benz trucks in the
light, medium and heavy duty segments, especially for the South American markets. We also sell trucks we manufacture in our European factories in Africa, Asia and Australia.

Our
U.S. subsidiary Freightliner manufactures trucks and buses (based on truck chassis) in Classes 5 through 8 (from 16,000 lbs. GVW to 33,000 lbs. GVW and over) under the Freightliner,
Sterling, Western Star, and Thomas Built Buses brand names, primarily for the U.S. and Canadian markets. Through American La France, Freightliner is active in the custom fire truck chassis market.
Freightliner also manufactures chassis for trucks, buses and motorhomes in Classes 3 through 7 (from 10,000 lbs. GVW to 33,000 lbs. GVW).

In
2003, Freightliner expanded its model range by adding new versions of the M2 Business class truck which it launched in 2002, including heavy duty models and crew cab options. In 2004,
Freightliner plans to introduce a new integrated school bus, the C2 Safe T-Liner.

Buses.We are a full-line supplier in the worldwide bus and coach market. We utilize our global production
facilities in France, Germany, Spain, Turkey, Canada, Mexico, Brazil, and the United States to tailor our product range to local market requirements and preferences. Our product portfolio includes
city buses, coaches, interurban buses, midi buses and bus chassis. In Europe, we sell complete buses under the Mercedes-Benz and Setra brands and in the United States and Canada under the
Setra and Orion brand names. We also sell Mercedes-Benz buses in Mexico and produce bus chassis in various countries.

In
2003, Setra launched several new bus models: the S 416 HDH to complete the TopClass 400 family, the S 417 for the U.S. market and the new ComfortClass 400. Mercedes-Benz
introduced the Travego 16RHD and the new Midi Coach Tourino. Additionally, we delivered 30 emission-free fuel cell buses, which are based on the Mercedes-Benz
city-bus Citaro, to ten major European cities. For additional information regarding our fuel cell activities, please refer to the discussion under the heading "Research and Development" in
"Item 5. Operating and Financial Review and Prospects." For our commercial vehicles, we manufacture diesel engines, axles and transmissions under the Mercedes-Benz and Detroit Diesel brand
names for on-highway use. In

24

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November 2003,
we sold a 60% equity interest in our wholly-owned subsidiary Mercedes-Benz Lenkungen GmbH, a company that produces steering systems, to ThyssenKrupp Automotive AG. We
account for our remaining 40% equity interest in that company using the equity method of accounting.

Off-Highway.Our off-highway business focuses exclusively on engine applications for rail and marine
products and stationary industrial and commercial applications, for example, electrical back-up generators. We sell our off-highway-products under the brand names
Mercedes-Benz, Detroit Diesel and MTU.

MFTBC.In January 2003, Mitsubishi Motors Corporation (MMC) spun off its "Fuso Truck and Bus" division, creating
Mitsubishi Fuso Truck and Bus Corporation (MFTBC). In March 2003, we (DaimlerChrysler AG) acquired from MMC a non-controlling 43% interest in MFTBC for [EURO]764 million in
cash. Ten Mitsubishi Group companies, including Mitsubishi Corporation, Mitsubishi Heavy Industries and Bank of Tokyo-Mitsubishi, entered into a separate share sale and purchase agreement with MMC
pursuant to which they agreed to purchase from MMC a total of 15% of MFTBC's shares for approximately [EURO]266 million in cash. MMC retained a 42% interest in MFTBC. We have accounted for our
non-controlling equity interest in MFTBC using the equity method of accounting. On January 15, 2004, we agreed to acquire from MMC an additional 22% interest in MFTBC for
approximately [EURO]0.4 billion in cash. We expect to consummate the transaction in March 2004, once we have received all applicable governmental approvals, and to consolidate MFTBC in
our financial statements in the second quarter of 2004. Following completion of the transaction, MMC will hold 20% and we will hold 65% of MFTBC.

HMC.In June 2001, we (DaimlerChrysler AG) entered into a commercial vehicle joint venture agreement with Hyundai
Motor Company (HMC). In a first phase, we and HMC established DaimlerHyundai Truck Corporation (DHTC), of which we and HMC each own 50%. We formed DHTC to produce and distribute engines and engine
parts. We are currently proceeding towards the production start which we anticipate will be in mid-2004. The commercial vehicle joint venture agreement with HMC also included an option for
us to acquire 50% of the commercial vehicle business of HMC. Pursuant to this option, which we exercised in December 2002, it is intended that HMC would contribute its entire commercial vehicle
business into a new legal entity. Discussions regarding the establishment of the commercial vehicle joint venture between us and HMC are ongoing and the establishment of the joint venture is therefore
still tentative.



Markets.The market for commercial vehicles depends significantly on the prevailing general economic conditions since they
directly influence transportation needs and the availability of funds for capital investment. Our most important commercial vehicle markets are Western Europe, North America and South America. Due to
weak economic conditions in several of our core markets, 2003 demand lagged behind 2002. In addition, excess capacity and fierce competition among the primary truck manufacturers resulting in intense
pricing pressure continue to characterize the truck industry.

Total
commercial vehicle registrations for trucks, vans and buses in Western Europe decreased slightly by 2% to 1,268,800 units. Registrations in Germany decreased by 4% to 278,400
units.

In
the NAFTA region, sales for all manufacturers of trucks in Classes 5 through 8 at 345,900 units were slightly above 2002 levels. In the United States, retail sales of all
manufacturers in Classes 5 through 8 increased from 284,400 units in 2002 to 288,800 units in 2003. The U.S. Class 5-7 truck segment increased from 138,400 units in 2002 to 146,800
units in 2003, while sales for all manufacturers in the Class 8 heavy duty truck category decreased from 146,000 units in 2002 to 142,000 units in 2003. This decrease was the result of
accelerated vehicle purchases during 2002, triggered by new engine emission standards which became effective in the United States on October 1, 2002.

After
a decline in demand for commercial vehicles in 2002, the South American markets, in particular Argentina, experienced a slight 1% market recovery in 2003.

25

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Sales.The following table shows the distribution of revenues and unit sales for our Commercial Vehicles segment by
geographic market since 2001:

Revenues and Unit Sales

Year Ended December 31,2003

% change

2002

% change

2001Revenues1Western Europe

13,965

+1

13,765

-5

14,415Germany

6,942

+2

6,788

-6

7,227Other

7,023

+1

6,977

-3

7,188NAFTA region

9,282

-7

9,970

+5

9,463United States

7,969

-6

8,462

+5

8,076Canada

851

-9

936

+31

716Mexico

462

-19

572

-15

671South America

1,060

-3

1,088

-25

1,456Brazil

726

-3

748

-21

943Other

334

-2

340

-34

513Other markets

4,210

+18

3,578

+11

3,238World

28,517

0

28,401

-1

28,572UnitsWestern Europe

249,500

-6

265,200

-4

275,800Germany

101,700

-2

103,300

-3

106,000Other

147,800

-9

161,900

-5

169,800NAFTA region

134,200

+14

118,000

+11

105,900United States

114,600

+15

99,800

+12

89,400Canada

10,100

+5

9,600

+52

6,300Mexico

9,500

+10

8,600

-16

10,200South America

40,200

+9

37,000

-14

43,000Brazil

30,800

+4

29,600

-12

33,800Other

9,400

+27

7,400

-20

9,200Other markets

77,100

+18

65,200

-4

68,200World

501,000

+3

485,400

-2

492,900


---

---

Worldwide unit sales of our Commercial Vehicles segment increased by 3% from 485,400 vehicles in 2002 to 501,000 units in 2003. Sales of vans
decreased by 2% from 246,100 units in 2002 to 240,300 units in 2003, bus unit sales increased by 12% from 25,300 units in 2002 to 28,300 units in 2003, and sales of trucks increased by 9% from 214,000
to 232,400 units.

The
overall 6% decrease of commercial vehicles units sales in Western Europe is primarily due to lower sales of Mercedes-Benz trucks and vans, which were only partially
offset by increased sales of buses sold under the Mercedes-Benz and Setra brand names (+14%).

In
Germany, the most important market for our Mercedes-Benz and Setra commercial vehicles, we sold 101,700 units in 2003, a decrease of 2% compared to the previous year. Unit
sales in Germany represented 20% and the remaining Western European market 30% of our total 2003 commercial vehicle sales.

26

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In
the NAFTA region, our commercial vehicle sales increased significantly to 134,200 units in 2003. This increase was achieved through higher sales of Freightliner's Business Class
(mainly Class 6/7), commercial vehicle chassis manufactured by a Freightliner subsidiary, and fire trucks and other specialty vehicles produced by the Freightliner subsidiary American LaFrance. In
addition, sales of the Sprinter van in the NAFTA region nearly tripled to 11,800 units.

After
the economic and financial crisis in Argentina and uncertain sentiment in Brazil due to the national elections in 2002, which had a negative effect on our 2002 sales, we saw a
recovery of sales in South America in 2003. As a result, unit sales in South America increased 9% from 37,000 units in 2002 to 40,200 units in 2003.

The
following table shows, by vehicle category, the unit sales of our Commercial Vehicles segment since 2001:

Year Ended December 31,2003

2002

2001UnitsVans1

240,300

246,100

257,800Trucks2

232,400

214,000

207,500Buses

28,300

25,300

27,600Total

501,000

485,400

492,900


---

---

For a discussion of changes in revenues, see "Operating Results" in "Item 5. Operating and Financial Review and Prospects."

Competition.In Western Europe, the primary sales market for Mercedes-Benz vans, our principal competitors are
Fiat (Fiat, Iveco), Ford, Volkswagen and Renault.

In
the truck segment, competitors vary in each geographic region. In Western Europe, our main competitors are MAN, Iveco, Volvo, Scania, DAF and Renault. In the NAFTA markets, our main
competitors in the Class 5 through 8 truck categories are Navistar, Paccar (Kenworth/Peterbuilt), Volvo/Renault (Mack), General Motors and Ford.

Our
principal competitors in the bus sector (over 8t GVW) include Irisbus (Renault, Iveco, Heuliez, Karosa, Orlandi), Neoman (MAN, Neoplan), Volvo, Scania and Dennis in Western Europe
and Volkswagen, Volvo and Scania in South America.



In Germany, we sell our commercial vehicles through our own wholesale network. We also own several retail outlets. In other major European markets, a local
DaimlerChrysler subsidiary provides wholesale services to a network of independent dealers and, in several cases, to our own retail outlets. Outside Europe, we sell our commercial vehicles through
independent distributors or, if we have a local production company, through the sales organization of the production company.

We
will also continue to pursue our goal of establishing our own retail outlets in major European metropolitan centers in an effort to strengthen our retail activities.

27

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In 2003, our Commercial Vehicles segment had capital expenditures for fixed assets of [EURO]1.0 billion. These expenditures primarily related to our new
models of the Vito/Viano and Actros that we introduced in various markets in 2003, the future successor model of the Sprinter, heavy-duty versions of the Freightliner Business Class
successor, the new school bus of Thomas Built Buses and new low-emission engines.

Research
and development projects in the commercial vehicles area focused on new products, especially the Sprinter successor, the new Freightliner Premium class, the new Atego, engines
meeting new low-emission regulations (Euro IV/V, EPA 04/07), and a new heavy duty engine family. In 2003, our expenses for research and development amounted to [EURO]1.0 billion.

The
table below shows capital expenditures for fixed assets and research and development expenditures of our Commercial Vehicles segment during the last three years:

Year Ended December 31,2003

2002

2001([EURO] in millions)Capital expenditures for fixed assets

1,006

1,263

1,484Research and development

1,013

959

1,015


---

Services

Our services activities, which contributed approximately 10% of our revenues in 2003, consist almost exclusively of financial services supporting our automotive
businesses. We provide these services through our wholly-owned subsidiary, DaimlerChrysler Services AG.

In
October 2000, we sold a 50.1% controlling interest in our information technology activities to Deutsche Telekom. In March 2002, we exercised our option to sell to
Deutsche Telekom our remaining 49.9% interest in these activities. You can find additional information about these transactions under the heading "Operating Results  Overview of
Business Segments Revenues and Operating Profits (Loss)" in "Item 5. Operating and Financial Review and Prospects," and in Note 4 to our Consolidated Financial Statements.

The
revenues of our services segment amounted to [EURO]14.0 billion in 2003, [EURO]15.7 billion in 2002 and [EURO]16.9 billion in 2001 and were almost exclusively
attributable to our financial services.

The
financial services we offer consist mainly of customized financing and leasing packages for our retail and wholesale customers in the automotive sector. We also provide financing to
our dealers for property, plant and equipment purchases and vehicle inventory. Since 2002, we operate a fully licensed bank, the DaimlerChrysler Bank, in Germany. The DaimlerChrysler Bank offers
financial services in Germany, which include leasing and sales-financing services and car savings plans to our customers and employees, as well as credit cards and demand-deposit accounts. In
addition, we offer insurance and reinsurance brokerage and fleet management services, including dealer property and casualty insurance.

In
an effort to refocus our financing and leasing portfolios on the automotive sector, which is our core business, we disposed of several non-automotive financial assets in
2002 and 2003. Most importantly, during 2002 we sold substantial portions of our commercial real estate and asset-based lending portfolios to GE Capital and other financial services providers for an
aggregate amount of [EURO]1.3 billion. We sold additional portions of our capital services portfolio in 2003 for proceeds of [EURO]0.3 billion.

We
also own, or hold minority investments in, several smaller companies for which we account using the equity method of accounting. Some of these companies provide services in the areas
of mobility management, including traffic management, telematics products and toll collection. With respect to our involvement in toll

28

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collection
services, in September 2002, a consortium consisting of our subsidiary DaimlerChrysler Services AG, Deutsche Telekom and Compagnie Financiere et Industrielle des Autoroutes
(Cofiroute) has contracted with the Federal Republic of Germany to develop, install and operate a system for electronic collection of tolls from all commercial vehicles over 12t GVW using German
highways. Toll Collect GmbH, a German limited liability company in which we and Deutsche Telekom each hold a 45% interest and Cofiroute holds the remaining 10%, is the principal builder and
prospective operator of the system. You can find additional information about Toll Collect GmbH under the heading "Off-Balance Sheet Arrangements" in "Item 5. Operating and Financial
Review and Prospects," and under the heading "Legal Proceedings" in "Item 8. Financial Information."



The following table shows the distribution of revenues derived from our services activities by geographic market since 2001:

Year Ended December 31,2003

2002

2001([EURO] in millions)European Union

5,460

5,048

4,646Germany

3,759

3,497

3,182Other

1,701

1,551

1,464NAFTA region

7,917

9,994

11,596United States

6,680

8,578

9,868Canada and Mexico

1,237

1,416

1,728Other markets

660

657

609World

14,037

15,699

16,851


---

In 2003, we generated approximately 56% of our total financial services business volume in the NAFTA region, 27% in Germany and 12% in other
European Union countries. We discuss period-to-period changes in revenues under the heading "Operating Results" in "Item 5. Operating and Financial Review and Prospects."

The
Services segment processed new leasing and finance contracts covering approximately 1,943,731 units in 2003 with a total value of [EURO]47.5 billion. In 2002, we processed new
leasing and finance contracts covering 1,991,000 units with a total value of [EURO]51.8 billion. The total value of leasing and finance contracts at December 31, 2003 was
[EURO]98.2 billion compared to [EURO]109.3 billion at December 31, 2002. The 10% decrease in total contract value is due to foreign currency translation effects. Adjusted to
exclude currency translation effects, our total contract value increased 2% compared to 2002. The average monthly payment for new vehicle installment sale contracts in 2003 was [EURO]543. The average
new contract balance amounted to [EURO]24,417 and the average original term was 47 months.

29

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The following table shows the number of units and the value covered by new leasing and finance contracts as well as the number of units and the value covered by all our outstanding
leasing and finance contracts at December 31, 2003 (in each case by geographic area and in total):

Units Covered By New Contracts

Value
([EURO] in millions)

Units Covered By All Contracts

Value
([EURO] in millions)United States1

1,153,203

28,408

4,050,518

58,249Germany1

302,085

7,511

655,346

13,222Canada1

166,832

3,551

591,323

7,638United Kingdom1

59,193

1,675

122,820

2,784Mexico

42,727

640

137,146

1,174Italy

44,525

912

156,102

2,437France

31,548

809

77,658

1,597Japan1

22,669

689

78,123

1,387Australia1

19,910

590

50,629

1,308Netherlands

14,125

391

47,705

1,000Other Countries1

86,914

2,283

231,137

7,403Total

1,943,731

47,459

6,198,507

98,199


---

---

In the leasing and financial services area, our competitors include leasing and finance subsidiaries of banks and financial institutions. We also
compete with the financial services businesses of other automobile manufacturers to the extent they do not limit their activities to their own automobile brands.



In 2003, our Services segment spent [EURO]76 million on fixed assets compared to [EURO]95 million in 2002. These expenditures related largely to the
acquisition of data processing equipment. We also added [EURO]11.6 billion of equipment under operating leases compared to [EURO]12.9 billion in 2002.

Other Activities

Our Other Activities segment comprises our businesses, operations and investments not allocated to one of our other business segments. The segment includes
primarily our holdings in EADS and Mitsubishi Motors Corporation (MMC), our real estate and corporate research activities, our holding companies, our financing subsidiaries through which we refinance
the capital needs of our operating businesses in the capital markets and, until December 31, 2003, our MTU Aero Engines business unit.

On
December 31, 2003, we sold MTU Aero Engines GmbH and its subsidiaries to the investment company Kohlberg, Kravis and Roberts & Co. Ltd. (KKR) for
[EURO]1,450 million, consisting of [EURO]1,052 million in cash and net debt of [EURO]398 million being assumed. We further agreed to provide a vendor loan to KKR in the amount of
[EURO]175 million, reducing our cash proceeds from the transaction to [EURO]877 million. The sale of MTU Aero Engines also triggered a compensation payment of $250 million to
United Technologies Corporation, the parent company of Pratt & Whitney, which we paid in January 2004. This compensation payment released us from financial obligations, which we had
undertaken in order to facilitate a pre-existing strategic alliance between MTU Aero Engines and Pratt & Whitney. As required by U.S. GAAP, we reclassified and are reporting the
results of MTU Aero Engines and the gain on the sale of this business as discontinued operations in our consolidated statements of income (loss). We have adjusted our consolidated statements of income
(loss) for all

30

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periods
presented to reflect this presentation. MTU Aero Engines develops, produces and maintains engine components for commercial, executive and military aircraft and is one of the leading providers
of maintenance and repair services for jet engines. For further information regarding the effects on our operating profit, please refer to "Operating Results" in "Item 5. Operating and Financial
Review and Prospects."

Revenues
reported in our Other Activities segment originated essentially from the MTU Aero Engines business and are now presented separately as "discontinued operations." Our revenues
from continuing operations originate mainly from our real estate business which consists primarily of property at the Potsdamer Platz in Berlin, Germany.

In
July 2000, we combined the aerospace activities operated by our subsidiary DaimlerChrysler Aerospace AG, with the businesses of the French aerospace company Aerospatiale Matra
S.A. and the Spanish aerospace company Construcciones Aeronauticas S.A. into European Aeronautic Defence and Space Company EADS N.V. As part of the transaction, we exchanged our controlling interest
in DASA for a non-controlling 33% minority interest in EADS.

In
October 2000, we acquired a non-controlling 34% equity interest in Mitsubishi Motors Corporation. In June 2001, we purchased AB Volvo's 3.3% equity interest
in Mitsubishi Motors Corporation, increasing our non-controlling interest in Mitsubishi Motors Corporation to 37.3%. Rights offerings by Mitsubishi Motors Corporation in 2003 and 2002
reduced our equity interest to 37.0%. In conjunction with the acquisition of Volvo's 3.3% equity interest we received Volvo's rights in several operational contracts with Mitsubishi Motors
Corporation, including all rights resulting from Volvo's cooperation with Mitsubishi's truck operations which are now part of Mitsubishi Fuso Truck & Bus Corporation.

We
account for the minority interests we hold in EADS and Mitsubishi Motors Corporation using the equity method of accounting and we report our share of the operating results of EADS and
of Mitsubishi Motors Corporation as part of the operating results of our Other Activities segment. Please refer to "Critical Accounting Policies" in "Item 5. Operating and Financial Review and
Prospects" for more information regarding our holdings in EADS and MMC.

In
April 2001, we sold a controlling interest in our TEMIC automotive electronics business for proceeds of [EURO]398 million. In April 2002, we sold our remaining
40% minority interest in that business for proceeds of [EURO]215 million.

The
following table shows the revenues generated by our Other Activities segment since 2001:

Year Ended December 31,2003

2002

2001([EURO] in millions)Automotive Electronics1





294Rail Systems2





1,086Real Estate and other businesses

440

508

640Total revenues from continuing operations3

440

508

2,020Revenues derived from discontinued operations3 (MTU Aero Engines)

1,933

2,215

2,487Total revenues from continuing and discontinued operations

2,373

2,723

4,507


---

---

For a discussion of changes in revenues, see "Operating Results" in "Item 5. Operating and Financial Review and Prospects."

31

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The following table sets forth the distribution of revenues from continuing operations of our Other Activities by geographic market since 2001:

Year Ended December 31,20031

20021,2

20011([EURO] in millions)European Union

392

427

1,496Germany

373

410

1,017Other

19

17

479NAFTA region

36

68

298United States

32

63

279Canada and Mexico

4

5

19Asia

6

5

69Other markets

6

8

157World

440

508

2,020


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SUPPLIES AND RAW MATERIALS

In 2003, we purchased goods and services from suppliers around the world with a total value of approximately [EURO]99.7 billion compared to
[EURO]102.1 billion in 2002. Mercedes Car Group accounted for 40% of our total purchase volume, Chrysler Group for 33%, Commercial Vehicles for 23%, Services for 3%, and Other Activities for
1%. We purchase various commodities used in vehicle manufacturing, such as steel, through long-term supply agreements. From time to time, we also purchase commodities on the spot market.

We
operate our worldwide procurement and supply activities through a single global procurement and supply function. We are aiming at maximizing the efficiency of our supply networks by
working not only with the first tier supplier but also with sub-suppliers, raw material suppliers, and transportation carriers. E-procurement is one of several standard
processes we use in purchasing supplier products and managing logistics.

In
2003, prices for steel products in the United States increased slightly due to the tariffs imposed by the U.S. government on steel imported into the United States. The exclusion
granted on the federally mandated tariff was a mitigating factor. In Germany, we negotiate steel prices generally on an annual basis and we attempt to negotiate a fixed price if we think it will be to
our benefit. In recent weeks increased demand, in large part from China, resulted in significant volatility in steel prices, which may continue throughout 2004.

Aluminum
and copper prices started low and began rising during the course of the year as the U.S. economy began to improve and demand for both materials increased significantly in the
secondary (scrap) market primarily as a result of demand from China. These developments reduced local supply availability in the U.S. and resulted in further price increases, especially in the second
half of the year. In Germany, aluminum and copper prices remained relatively stable.

Resin
(plastic) prices fluctuated with the price of oil and demand for plastic. We avoided material shortages and substantial price increases by carefully managing our current and future
requirements and delivery needs in close cooperation with our suppliers and sub-suppliers.

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Precious
metals, including platinum, palladium and rhodium, which we primarily use in catalytic converters, are subject to price volatility. We use derivative instruments to the extent
we deem appropriate, to hedge against this volatility. We also continue to research alternative materials and processes for use in these components. In addition, we further enhanced the control and
oversight over our commodity price exposure by establishing a corporate commodity risk management committee.

GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS

The automotive industry is subject to extensive government regulation. Laws in various countries regulate the emission levels, fuel economy, noise, and safety of
vehicles, as well as the levels of pollutants generated by the plants that produce them. These regulations often impose substantial testing and certification requirements. The cost of complying with
these regulations can be significant, and we expect to incur significant compliance costs in the future. We recognize, however, that leadership in environmental protection is an increasingly important
competitive factor in the marketplace.

Vehicle Emissions

U.S. Standards.Federal.Under the Federal Clean Air
Act, the Environmental Protection Agency, or EPA, has imposed tailpipe emission control standards on passenger cars and light trucks, including minivans, sport utility vehicles, and pickup trucks. The
standards in effect for model year 1994-2003 passenger cars and light trucks are known as Tier 1 standards. Manufacturers are obligated to recall vehicles that fail to meet those standards
for ten years or 100,000 miles, whichever occurs first.

The
EPA also adopted Tier 2 standards that establish identical and stringent tailpipe emission requirements for passenger cars and light trucks. Tier 2 standards, which will be phased in
over model years 2004-2009, obligate manufacturers to recall vehicles that fail to meet the standards for ten years or 120,000 miles, whichever occurs first. The Tier 2 standards present a
significant technological challenge to the automobile industry, particularly with respect to diesel engines. Beginning with 2004 model year vehicles, manufacturers are not able to sell vehicles in the
United States that do not meet the new standards. Further research and development achievements on the part of the automotive industry will be required if the industry is to continue to comply with
these new standards as applied to later model years.

Separate
standards are in effect for heavy light-duty trucks (those in excess of 8,500 pound gross vehicle weight) and heavy-duty commercial vehicles. Stringent
standards apply to model year 2004-2006 vehicles, and even more stringent standards will be phased in over model years 2007-2010.

California Standards.The State of California sets its own stringent emission control standards for passenger cars and
trucks. Its low emission vehicle program establishes more restrictive standards over model years 2004-2007 than those in effect for model years 1993-2003. Meeting these new
standards in later years will require significant progress in the development of engine, exhaust aftertreatment, and fuel control technologies.

An
important part of California's program is the introduction of zero-emission vehicles (ZEVs). The California Air Resources Board (CARB) issued a series of regulations in
the 1990s that required an increasing number of the passenger cars and light trucks sold in California each year by large-volume manufacturers to be certified as ZEVs (up to 10% by model year 2003).
In 2003, in connection with the settlement of litigation brought by vehicle manufacturers (including our subsidiary, DaimlerChrysler Corporation) and dealers, CARB proposed amended regulations to
allow manufacturers to satisfy the ZEV mandate with vehicles that use various technologies (electric batteries, hydrogen fuel cells, compressed natural gas, gasoline/electric hybrids) to produce
limited or no emissions. The amended regulations would take effect beginning with model year 2005.

Other
states may either adopt the California standards or participate in the EPA's national low emission vehicle program requiring manufacturers to sell low emission vehicles nationwide
beginning with the 2001

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model
year. To date, the states of Maine, Massachusetts, New York, and Vermont have adopted the California standards, but only Massachusetts and New York have adopted the requirement for
zero-emission vehicles. Other states have expressed interest in adopting California's zero-emission standards when they become final. We expect to continue to incur significant
costs in developing these low or zero emission technologies.

We
participate with other vehicle manufacturers and the U.S. Department of Energy in Freedom CAR, a research project formed to develop fuel cell technology to power vehicles. Development
of a commercially viable fuel cell vehicle will require further intensive research. Without new technology, we and other manufacturers may be forced to take costly actions such as reducing the number
of non-zero-emission vehicles offered for sale in California or selling battery-powered electric vehicles below cost.

Our
subsidiary DaimlerChrysler Corporation has held discussions with CARB and the EPA about the performance of the catalytic converters in some of its 1991-1999 model year
vehicles, and the on-board diagnostic systems used to monitor catalytic converter function in certain of its 1996-2001 model year vehicles. DaimlerChrysler Corporation would
incur significant costs if it were required to repair or replace these emission control devices.

European Standards.Current vehicle emission control standards in the European Union are generally no
more restrictive than U.S. standards. However, the EU Commission and the European Parliament have adopted a directive that establishes increasingly stringent emission standards for passenger and light
commercial vehicles for model years 2005 and thereafter (EURO 4). Under the directive, manufacturers will be obligated to recall vehicles that fail to meet those standards for five years or 80,000
kilometers, whichever occurs first. Standards for heavy commercial vehicles have been adopted by the EU Commission and the European Parliament for model years 2005 (EURO 4) and 2008 and thereafter
(EURO 5). We believe that our passenger cars and commercial vehicles will comply with the European emission standards.

Vehicle Fuel Economy

U.S. Standards.Under the federal Motor Vehicle Information and Cost Savings Act, a manufacturer is
subject to significant penalties for each model year its vehicles do not meet Corporate Average Fuel Economy standards, commonly referred to as the CAFE standards. CAFE standards for passenger cars
and light-duty trucks are currently 27.5 miles per gallon and 20.7 miles per gallon, respectively. A
manufacturer earns credits by exceeding CAFE standards. Credits earned for the three preceding model years and credits projected to be earned for the next three model years can be used to meet CAFE
standards in the current model year, except that credits earned in respect of cars may not be used for trucks. In 2003, the National Highway Traffic Safety Administration (NHTSA) adopted new CAFE
standards for light-duty trucks, including minivans and sport utility vehicles, of 21.0 miles per gallon for 2005 model year vehicles, 21.6 miles per gallon for 2006 model year vehicles,
and 22.2 miles per gallon for 2007 model year vehicles.

We
expect to meet the current and proposed U.S. domestic fleet CAFE standards for both passenger cars and light-duty trucks, although we will likely use credits to meet the
standard for light-duty trucks. However, increased demand for larger light-duty trucks could jeopardize our ability to comply with those standards and require us to take
additional costly steps, including the sale of ethanol flexible fuel vehicles.

The
United States and other countries may adopt more stringent CAFE standards as a way of reducing "green house gas" carbon dioxide emissions by increasing fuel economy. These emissions
are said to contribute to global warming, which has become a matter of international concern. In 2001, the United States withdrew from the Kyoto Protocol to the United Nations Framework Convention on
Climate Change, which called for the United States to reduce substantially its fossil energy use during years 2008-2012. Nevertheless, the United States is considering ways to achieve
reductions in fossil energy use, including more stringent CAFE standards, higher fuel costs and restrictions on fuel usage.

Individual
states also may attempt to limit such emissions through regulation of fuel economy standards, although their authority to do so has been disputed in federal court. In
July 2002, California passed a law that

34

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requires
CARB to develop regulations that may require automakers to reduce significantly greenhouse gas emissions from their vehicles starting with 2009 models. State regulation in this area, if
upheld, could be costly to us and could significantly restrict the products we are able to offer in the United States.

In
addition to conventional gasoline powered vehicles, we manufacture vehicles that operate on compressed natural gas, liquid petroleum gas, and electricity, and flexible fuel vehicles
capable of operating on both gasoline and ethanol blend fuels.

European Standards.The European Union signed and ratified the Kyoto Protocol, pursuant to which it
is required to substantially reduce carbon dioxide emissions during years 2008 to 2012. In 1999, the European Union entered into a voluntary agreement with the European automotive manufacturers
association (ACEA) which establishes an emission target of 140 grams of carbon dioxide per kilometer for the average of new passenger cars sold in the European Union in 2008. That target represents an
average reduction in passenger vehicle fuel usage of 25 percent, measured from 1995 levels. The European Union has reaffirmed its goal of
reducing carbon dioxide emissions from new passenger cars to an average of 120 grams per kilometer by 2010. At the end of 2003, the ACEA started a consultation round with the European Commission on
further reduction potentials for the time after 2008. This consultation was requested by the European Commission and we, as a member of ACEA, are actively involved in this consultation process. Should
the Commission's target to reduce carbon dioxide emissions from new passenger cars to an average of 120 grams per kilometer become a mandatory standard this would require us to improve engine and
overall efficiency and reduce vehicle weight significantly.

In
addition, in 2003 the European Union and the ACEA discussed a voluntary agreement for emission standards for light commercial vehicles. So far no emission standards for light
commercial vehicles have been agreed upon since the ACEA could convince the European Commission to first establish a standardized test cycle like the New European Driving Cycle for passenger cars
(NEDC) for measuring fuel consumption and carbon dioxide emission, respectively, of light commercial vehicles in a standardized manner as a basis for future possible emission standards. As a result,
the European Commission adopted a directive, which requires us as of 2005 to measure carbon dioxide emissions of light commercial vehicles with a gross vehicle weight of up to 1.305 metric tons
(class 1) as a condition for selling such vehicles within the European Union. Similar rules are effective as of 2007 for light commercial vehicles with a gross vehicle weight of 1.306 to 1.760
metric tons (class 2) and 1.761 to 3.5 metric tons (class 3).

Vehicle Safety

U.S. Standards.The U.S. National Traffic and Motor Vehicle Safety Act of 1966, or the Safety Act,
requires new vehicles and original equipment sold in the United States to meet various safety standards established by NHTSA. The Safety Act also requires manufacturers to recall vehicles found to
have safety related defects and to repair them without charge. The cost of such recalls can be substantial depending on the nature of the repair and the number of vehicles affected. In 2001, NHTSA
completed its Interim Final Rule relating to advanced airbag systems. The rule imposes a new regimen of tests with stringent new injury criteria, and sets forth a compliance phase-in
schedule mandating that 35% of all vehicles produced by a manufacturer for the 2004 model year, 65% for the 2005 model year, and 100% for the 2006 and 2007 model years, meet the new safety standard.
These standards add to the cost and complexity of designing and producing new motor vehicles and original motor vehicle equipment.

On
November 1, 2000, the United States enacted the Transportation Recall Enhancement, Accountability and Documentation Act, or the TREAD Act. This act requires, among other
things:



35

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These
requirements impose additional cost and complexity to the vehicle development process. The TREAD Act also increases NHTSA's authority to impose civil penalties for noncompliance
and specifies possible criminal penalties.

In
general, vehicle safety regulations in Canada are similar to those in the United States. Countries in South America and Asia have also established vehicle safety regulations.

European Standards.Vehicles sold in Europe are subject to comparable vehicle safety regulations
established by the European Union or by individual countries. In addition, during the last three years the ACEA, of which we are a member, negotiated a voluntary self commitment on pedestrian safety
with the European Commission. The self commitment is comprised of two phases. Phase one criteria, which cover, among other things, the ban of rigid bull bars by original manufacturers, compliance with
specific head injury criteria and the introduction of antilock brake systems (ABS), have been embedded into a framework directive by the European Union and, as a consequence, are already legally
binding. Phase one criteria are effective from October 2005, whereby original manufacturers have to be in full compliance with the criteria until the end of 2012. Phase two criteria, which the
ACEA and the European Commission are still discussing, intend to amplify standards established in phase one. The goal of ACEA in its discussions with the European Commission is to convince the
Commission to open phase two for more active safety measures, like the mandatory introduction of electronic stability programs or other accident avoidance measures, instead of imposing more passive
requirements, like specific rules regarding the deformation of the crash zone of a car. Should these more restrictive phase two standards become mandatory, this would have a major impact on the design
freedom of our future passenger cars.

Stationary Source Regulation

Our assembly, manufacturing and other operations in the United States must meet a substantial number of regulatory requirements under various federal laws,
including the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the Pollution Prevention Act of 1990 and the Toxic Substances Control Act. State laws parallel and, in
some cases, impose more stringent requirements than federal law. Together these laws impose severe restrictions on airborne and waterborne emissions and discharges of pollutants, the handling of
hazardous materials, and the disposal of wastes. For example, similar requirements apply to our operations in Europe and Canada. Increasing governmental regulation and environmental enforcement is
also likely to develop in Mexico.

Our
subsidiary DaimlerChrysler Corporation is participating in a voluntary program established by the U.S. Department of Energy to reduce the greenhouse gas emissions from our
manufacturing facilities. Under this program, DaimlerChrysler Corporation has pledged to reduce these emissions by 10% per vehicle produced between 2002 and 2012.

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Other Environmental Matters

In the United States, the EPA and various state agencies have notified our subsidiary DaimlerChrysler Corporation that it may be a potentially responsible party
for the cost of cleaning up hazardous waste storage or disposal facilities pursuant to the Comprehensive Environmental Response, Compensation and Liability Act and other federal and state
environmental laws. A number of lawsuits allege that DaimlerChrysler Corporation violated environmental laws and seek to recover costs associated with remedial action. DaimlerChrysler Corporation is
only one of a number of potentially responsible parties who may be found to be jointly and severally liable for remediation costs. As of December 31, 2003, DaimlerChrysler Corporation may incur
remediation costs at 141 sites in connection with the foregoing matters and other remediation issues at its active or deactivated facilities.

Pollution
remediation is also a potentially significant issue in Germany at some of our older sites, including manufacturing plants and some of our own service outlets. These remediation
issues involve eleven principal sites.

Estimates
of future costs of these environmental matters are inevitably imprecise due to numerous uncertainties, including the enactment of new laws and regulations, the development and
application of new technologies, the identification of new sites for which we may have remediation responsibility and the apportionment and collectibility of remediation costs among responsible
parties. We establish reserves for
these environmental matters when the loss is probable and reasonably estimable. It is possible that final resolution of some of these matters may require us to make expenditures in excess of
established reserves, over an extended period of time and in a range of amounts that we cannot reasonably estimate. Although final resolution of any such matters could have a material effect on our
consolidated operating results for the particular reporting period in which an adjustment of the estimated reserve is recorded, we believe that any resulting adjustment should not materially affect
our consolidated financial position.

In
2000, the EU Commission issued a directive that requires automobile manufacturers to take back all end-of-life passenger cars (up to 9 seats) and light trucks
(up to 3.5t total weight) sold after July 1, 2002, and, beginning in January 1, 2007, all end-of-life passenger cars including those sold before July 1,
2002. This directive stipulates that automotive manufacturers incur all, or a significant part of, the costs of recycling these vehicles. The directive affects all
end-of-life-vehicles in the European Union and imposes additional costs on automobile manufacturers which could be significant. Currently, manufacturers already
take back vehicles sold before July 1, 2002, and batteries for disposal or recycling, but are allowed to charge their costs in these circumstances. In addition, German manufacturing facilities
are subject to enhanced noise restrictions.

We
are committed to reducing the environmental impact of our operations and products beyond currently applicable regulatory requirements where this is technically and financially
feasible. Our policy is environmental protection in pursuit of sustainable development. This policy is set forth in our environmental guidelines and designed to minimize further the environmental
effects generally associated with the type of manufacturing operations we conduct. We have installed environmental management systems in both our plant operations and our development departments to
consider environmental effects at the planning stage of a new manufacturing process or product. We publish environmental reports summarizing our use of resources and measures we have undertaken to
minimize further the environmental impact of our products and operations.

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DESCRIPTION OF PROPERTY

At December 31, 2003, we had 93 manufacturing facilities worldwide, of which 19 are located in Germany and 38 in the United States. Most of the remaining
facilities are in Mexico, Canada, France, Spain, Brazil and South Africa. We also have other properties, including office buildings, spare parts centers, retail outlets, research laboratories, test
tracks and warehouses, mainly in Germany and in the United States. We own most of these manufacturing facilities and other properties.

The
following table shows a list of our principal production and other facilities worldwide:



|Mercedes Car Group |                              | 
|------------------ | ---------------------------- | 
|Germany            |                              | 
|                   |  Berlin                     | 
|                   |  Bremen                     | 
|                   |  Hamburg                    | 
|                   |  Rastatt                    | 
|                   |  Sindelfingen               | 
|                   |  Stuttgart-Untertürkheim    | 
|United States      |                              | 
|                   |  Tuscaloosa, Alabama        | 
|Brazil             |                              | 
|                   |  Juiz de Fora               | 
|France             |                              | 
|                   |  Hambach                    | 
|South Africa       |                              | 
|                   |  East London                | 
|Chrysler Group    
|United States      |                              | 
|                   |  Belvidere, Illinois        | 
|                   |  Detroit, Michigan          | 
|                   |  Fenton, Missouri           | 
|                   |  Huntsville, Alabama        | 
|                   |  Indianapolis, Indiana      | 
|                   |  Kenosha, Wisconsin         | 
|                   |  Kokomo, Indiana            | 
|                   |  Newark, Delaware           | 
|                   |  Sterling Heights, Michigan | 
|                   |  Syracuse, New York         | 
|                   |  Toledo, Ohio               | 
|                   |  Trenton, Michigan          | 
|                   |  Twinsburg, Ohio            | 
|                   |  Warren, Michigan           | 
|                   |                              | 

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|Canada              |                              | 
|------------------- | ---------------------------- | 
|                    |  Brampton                   | 
|                    |  Toronto                    | 
|                    |  Windsor                    | 
|Mexico              |                              | 
|                    |  Saltillo                   | 
|                    |  Toluca                     | 
|Venezuela           |                              | 
|                    |  Valencia                   | 
|Commercial Vehicles
|Germany             |                              | 
|                    |  Düsseldorf                 | 
|                    |  Friedrichshafen            | 
|                    |  Gaggenau                   | 
|                    |  Kassel                     | 
|                    |  Ludwigsfelde               | 
|                    |  Mannheim                   | 
|                    |  Ulm                        | 
|                    |  Wörth                      | 
|United States       |                              | 
|                    |  Cleveland, North Carolina  | 
|                    |  High Point, North Carolina | 
|                    |  Mt. Holly, North Carolina  | 
|                    |  Portland, Oregon           | 
|                    |  Redford, Michigan          | 
|Argentina           |                              | 
|                    |  Buenos Aires               | 
|Brazil              |                              | 
|                    |  São Bernardo do Campo      | 
|Canada              |                              | 
|                    |  St. Thomas                 | 
|Mexico              |                              | 
|                    |  Santiago Tianguistenco     | 
|Spain               |                              | 
|                    |  Barcelona                  | 
|                    |  Vitoria                    | 
|Turkey              |                              | 
|                    |  Aksaray                    | 
|                    |  Hosdere                    | 
|                    |                              | 

39

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|Other Facilities
|----------------
|Germany         
|                
|                
|                
|                
|United States   
|                

In January 2003, our wholly-owned subsidiary DaimlerChrysler Corporation contributed its New Castle machining and forging facility to
NC-M Chassis Systems LLC, a joint venture company formed with Metaldyne Corporation. DaimlerChrysler Corporation owned 60% of the common stock of the joint venture company and Metaldyne
owned the remaining 40%. In December 2003, Metaldyne exercised its option to purchase DaimlerChrysler Corporation's 60% interest in the NC-M Chassis Systems LLC joint venture
company in exchange for cash and Metaldyne subordinated debt and preferred equity securities. Also in 2003, DaimlerChrysler Corporation committed to a plan for the significant downsizing or closure of
two other facilities in Huntsville, Alabama, and Indianapolis, Indiana.

At
year-end 2003, the total amount of indebtedness secured by mortgages and other security interests on our principal facilities was [EURO]1.7 billion. These mortgages
and other security interests related primarily to the Potsdamer Platz real estate project.

We
believe that our principal manufacturing facilities and other significant properties are in good condition and that they are adequate to meet our needs.

There
is significant production overcapacity in the worldwide automotive industry which threatens continued profitability of many manufacturers. As part of our strategic planning and
operations, we monitor our production capacity to ensure that overcapacity does not jeopardize our financial position. We also continually review worldwide capacity and capacity requirements and
developing and anticipated industry changes, and position ourselves accordingly. As market conditions fluctuate, we make adjustments to our capacity by opening, closing, expanding or downsizing
production facilities. We use capacity considerations in conjunction with other business objectives, such as plant modernization and labor market conditions, to determine where, and to what extent, we
should alter or shift our production capacity. In 2003, we made additional capacity adjustments in response to a variety of business considerations. As market conditions evolve, we may adjust our
production capacity accordingly.

40

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Item 5. Operating and Financial Review and Prospects.

INTRODUCTION

This annual report contains forward-looking statements that reflect our current views about future events. We use the words "anticipate," "assume," "believe,"
"estimate," "expect," "intend," "may," "plan," "project," "should" and similar expressions to identify forward-looking statements. These statements are subject to many risks and uncertainties,
including:



If
any of these risks and uncertainties occur, or if the assumptions underlying any of our forward-looking statements prove incorrect, then our actual results may be materially different
from those we express or imply by such statements. We do not intend or assume any obligation to update these forward-looking statements. Any forward-looking statement speaks only as of the date on
which it is made.

You
should read the following discussion of our critical accounting policies and our financial condition and operating results together with our consolidated financial statements and the
related Notes prepared in accordance with U.S. GAAP as of, and for the years ended, December 31, 2003, 2002 and 2001. Please refer to Note 1 to our Consolidated Financial Statements for
a description of our significant accounting policies.

The
comparability of our consolidated financial statements for the periods presented in this annual report is affected by currency translation effects resulting from our international
operations. In 2003, the euro, the currency in which we denominate our consolidated financial statements, strengthened significantly against several other world currencies, primarily the U.S. dollar.
All of our subsidiaries that report their results in a functional currency other than the euro are subject to currency translation risks. The recent appreciation of the euro affected the reported
results of our segments, especially the Chrysler Group segment which conducts the majority of its business in U.S. dollars.

Fluctuations
in the exchange rates of the U.S. dollar, the euro, and other world currencies also expose our international business operations and, consequently, our reported financial
results and cash flows to transaction risk. This transaction risk exposure primarily affects our Mercedes Car Group segment, which generates a significant portion of its revenues in foreign currencies
and incurs manufacturing costs primarily in euros. Our Commercial Vehicles segment is also subject to transaction risk, but only to a minor degree due to its global production network. Our Chrysler
Group segment generates almost all of its revenues and incurs most of its costs in U.S. dollars. As a result, the transaction risk of this segment is also relatively low. In 2003, the impact of
currency transaction risks on our operating results was relatively minor because we had a large portion of these risks covered by currency hedges. Because of our currency hedges, a continuation of the

41

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strength
of the euro in 2004 would only affect us to a limited degree. However, if the strength of the euro against major world currencies remains on the current level for a longer period of time or
if the euro appreciates even further, our earnings and operating profits, in particular those of our Mercedes Car Group segment, could be significantly adversely affected in the years following 2004.

Please
refer to the description under the heading "Exchange Rate Risk" in "Item 11. Quantitative and Qualitative Disclosures about Market Risks" for additional information on our
currency translation and transaction risk exposure.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Accounting Standard (SFAS) 143, "Accounting for Asset Retirement
Obligations." The statement requires that we record the fair value of an asset retirement obligation as a liability in the period in which we incur a legal obligation associated with the retirement of
tangible long-lived assets that result from the acquisition, construction, development and/or the normal use of the asset. We also record a corresponding asset that we
depreciate over the life of the asset to be retired. Following the initial measurement of the asset retirement obligation, we adjust the liability at the end of each period to reflect the passage of
time and changes in the estimated future cash flows underlying the obligation. We adopted SFAS 143 on January 1, 2003. The adoption of SFAS 143 did not have a significant impact
on the Group's consolidated financial statements.

In
June 2002, the FASB issued SFAS 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS 146 addresses financial accounting and reporting for
costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity." The provisions of SFAS 146 were effective for exit or disposal activities initiated after December 31, 2002. The adoption of SFAS 146 did not
have a significant impact on our consolidated financial statements.

In
November 2002, the EITF reached a final consensus on EITF 00-21, "Revenue Arrangements with Multiple Deliverables." The scope provisions of EITF 00-21
were slightly modified in May 2003. EITF 00-21 addresses certain aspects of the accounting of revenue arrangements with multiple deliverables by a vendor. EITF 00-21
outlines an approach to determine when a revenue arrangement that contains multiple deliverables should be divided into separate units of accounting and, if separation is appropriate, how the
arrangement consideration should be allocated to the identified accounting units. EITF 00-21 became effective for us in our financial statements beginning July 1, 2003 and we
applied the consensus prospectively to all transactions occurring after June 30, 2003. The adoption of EITF 00-21 did not have a significant impact on our consolidated financial
statements.

In
November 2002, the FASB issued FASB Interpretation (FIN) 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
of Others  an interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34." FIN 45 enhances the disclosures to be made by a
guarantor in its financial statements about its obligations under certain guarantees issued. FIN 45 also clarifies that a guarantor is required to recognize, at inception of a guarantee, a liability
for the fair value of the non-contingent portion of the obligation due to the issuance of the guarantee or, if higher, a probable loss under SFAS 5. The initial recognition and measurement
provisions of FIN 45 were applicable to guarantees issued or modified after December 31, 2002, without significant impact to our consolidated financial statements. The disclosures required by
FIN 45 were effective for financial statements of interim and annual periods ending after December 15, 2002. Please refer to Notes 25b and 31 to our Consolidated Financial Statements for FIN 45
disclosures.

In
December 2002, the FASB issued SFAS 148, "Accounting for Stock-Based Compensation  Transition and Disclosure  an amendment of
FASB Statement No. 123." SFAS 148 amends SFAS 123, "Accounting for Stock-Based Compensation," to provide alternative methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensation. In addition, SFAS 148 requires

42

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disclosures
in both interim and annual financial statements of the method of accounting used for stock-based employee compensation and the effect of the method used on reported results (see
Note 24 to our Consolidated Financial Statements and the table presented below).

During
the second quarter of 2003, we adopted the fair value recognition provisions of SFAS 123 prospectively, as permitted by SFAS 148, to all employee awards granted,
modified, or settled after January 1, 2003. Compensation expense for all awards granted prospectively from December 31, 2002, will be measured at the grant date based on the fair value
of the equity award using a modified Black-Scholes option-pricing model. Compensation expense will be recognized over the employee service period with an offsetting credit to equity
(paid-in capital). We will continue to account for options granted prior to January 1, 2003, using the intrinsic value based approach under Accounting Principles Board Opinion (APB)
No. 25, "Accounting for Stock Issued to Employees," and related Interpretations. Under APB 25, we measured compensation expense at the grant date based on the difference between the strike
price of the equity award and the fair value of the underlying stock as of the date of grant. The adoption of the fair value based method for awards granted in April 2003 resulted in additional
compensation expense in the Group's statement of income (loss) of [EURO]37 million for 2003, ([EURO]23 million, net of taxes, or [EURO]0.02 per share, respectively). The following table
illustrates the effect on net income (loss) and earnings (loss) per share if the fair value based method had been applied to all outstanding and unvested awards in each period.

|                                                                                                                                                |  | Year Ended December 31, |  
|----------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | -
|
|
|Net income (loss)                                                                                                                               |  | 448                     |  
|Add: Stock-based employee compensation expense included in reported net income, net of related tax effects                                      |  | 81                      |  
|Deduct: Total stock-based employee compensation expense determined under the fair value based method for all awards, net of related tax effects |  | (164                    | )
|Pro forma net income (loss)                                                                                                                     |  | 365                     |  
|Earnings (loss) per share (in [EURO]):                                                                                                          |  |                         |  
|Basic                                                                                                                                           |  | 0.44                    |  
|Basic  pro forma                                                                                                                               |  | 0.36                    |  
|Diluted                                                                                                                                         |  | 0.44                    |  
|Diluted  pro forma                                                                                                                             |  | 0.36                    |  

In December 2003, the FASB issued FIN 46 (revised December 2003), "Consolidation of Variable Interest Entities" ("FIN 46R"), which
addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and accordingly should consolidate the entity.
FIN 46R replaces FIN 46, "Consolidation of Variable Interest Entities," which was issued in January 2003. We applied the unmodified provisions of FIN 46R to "special purpose entities" as of
December 31, 2003, and will apply FIN 46R to all entities that are not "special purpose entities" as of March 31, 2004. Please refer to Note 2 to our Consolidated Financial
Statements for further information about the impact of FIN 46R on our Consolidated Financial Statements.

In
March 2003, the EITF reached consensuses on the remaining issues of EITF 02-9, "Accounting for Changes That Result in a Transferor Regaining Control of Financial
Assets Sold." EITF 02-9 requires the transferor to recognize at fair value financial assets previously sold when control over the financial assets is regained as if the transferor had
repurchased the assets, together with a corresponding liability to the transferee. Gain or loss recognition by the transferor is precluded if control is regained over assets sold. EITF
02-9 also applies to any beneficial interest or to qualifying special purpose entities that become non-qualifying. Servicing assets or liabilities and other retained interests
continue to be accounted for separately. Loan loss allowances may not be recognized as of the repurchase date. EITF 02-9 is applicable for changes occurring after April 2, 2003 that
result in the transferor regaining control over financial assets previously sold. The application of EITF 02-9 did not have a material effect on our consolidated financial statements.

43

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In
April 2003, the FASB issued SFAS 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." SFAS 149 amends and clarifies accounting for
derivative instruments and hedging activities under SFAS 133. SFAS 149 is generally effective for contracts entered into or modified after June 30, 2003. However, the provisions
of SFAS 149 that relate to Derivative Implementation Group Issues that have been effective for fiscal quarters that began prior to June 15, 2003, shall continue to be applied in
accordance with their respective effective dates. The adoption of SFAS 149 did not have a significant impact on our consolidated financial statements.

In
May 2003, the FASB issued SFAS 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS 150 amends the
accounting and classification for certain financial instruments, such as those used in most stock buy-back programs that previously were accounted for and classified as equity.
SFAS 150 requires that certain types of freestanding financial instruments that have characteristics of both liabilities and equity be classified as liabilities with, in most cases, changes in
fair value flowing through the income statement. SFAS 150 could affect companies' ratios, performance measures and certain stock buy-back programs. We applied the provisions of
SFAS 150 immediately to all financial instruments entered into or modified after May 31, 2003, and otherwise to all existing financial instruments as of July 1, 2003. The adoption
of SFAS 150 did not have a significant impact on our consolidated financial statements.

In
May 2003, the EITF reached a consensus on EITF 01-8, "Determining Whether an Arrangement Contains a Lease." EITF 01-8 clarifies certain provisions of
SFAS 13, "Accounting for Leases" with respect to the identification of lease elements in arrangements that do not explicitly include lease provisions. Any lease element identified under EITF
01-8 should be accounted for under current lease accounting literature by lessors and lessees. DaimlerChrysler applied EITF 01-8 prospectively to arrangements newly agreed to,
modified, or acquired in a business combination beginning July 1, 2003. Initial adoption of EITF 01-8 did not have a significant impact on our consolidated financial statements.

In
November 2003, the EITF reached a partial consensus on EITF 03-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to
Certain Investments." EITF 03-1 addresses the meaning of other than temporary impairment and its application to investments classified as either available-for-sale
or held-to-maturity under SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities," and investments accounted for under the cost method or the equity
method. Although no consensus was reached on how to evaluate when an impairment of securities or investments is other than temporary, the EITF agreed on certain quantitative and qualitative
disclosures about unrealized losses pertaining to debt and equity securities classified as available-for-sale or held-to-maturity. The disclosures
required by EITF 03-1 are effective for fiscal years ending after December 15, 2003. Please refer to Note 20 to our Consolidated Financial Statements for more information.

In
December 2003, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position (SOP) 03-3,
"Accounting for Certain Loans or Debt Securities Acquired in a Transfer." SOP 03-3 is applicable to loans and debt securities with characteristics of loans acquired in a transfer
(including business combinations) and limits recognition and display of the accretable yield to the excess of cash flows expected to be collected over the initial investment. The SOP prohibits
carrying over or create valuation allowances at initial recognition. Subsequent increase in cash flows expected to be collected should be recognized prospectively. Subsequent decreases should be
recognized as impairment. The provisions are effective for loans acquired in fiscal years beginning after December 15, 2004. Impairment provisions apply prospectively for loans existing at
December 15, 2004 for fiscal subsequent years. We are currently determining the effect from application of SOP 03-3 on our consolidated financial statements.

In
December 2003, the FASB issued SFAS 132 (revised 2003), "Employers' Disclosure about Pensions and Other Postretirement Benefits (revised 2003)  an
amendment of FASB Statements No. 87, 88, and 106," which requires additional disclosures about our defined benefit plan and other postretirement plan assets,

44

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obligations,
net costs, and cash flows. We have adopted the new disclosure requirements as of December 31, 2003. Please refer to Note 25a to our Consolidated Financial Statements for our
disclosure about pensions and other postretirement benefits.

Please
refer to Note 1 to our Consolidated Financial Statements for a description of our significant accounting policies.

INFLATION

In Germany, the average inflation rate in 2003 was 1.1% compared to 1.4% in 2002 and 2.0% in 2001. In the United States, the average inflation rates for those
years were 2.3% in 2003, 1.6% in 2002 and 2.8% in 2001. Inflation has not had a significant effect on our operating results in recent years.

CRITICAL ACCOUNTING POLICIES

Our reported financial position and results of operations are sensitive to the accounting methods we select and the accounting estimates underlying the
preparation of our financial statements. The following critical accounting policies, and the related judgments and other uncertainties affecting the application of those policies, are factors you
should consider in reviewing our financial statements and the discussions below under the headings "Operating Results" and "Liquidity and Capital Resources."

Recoverability of Investment in Equipment on Operating Leases

We own equipment, primarily passenger cars and commercial vehicles, that we lease to customers under operating leases. At December 31, 2003, the total
carrying value of this equipment was [EURO]24.4 billion. Operating leases for equipment representing approximately 88% of the total 2003 and 2002 carrying value originated with our financial
services business.

We
carry equipment on operating leases initially at its acquisition cost and depreciate it over the contractual term of the lease, using the straight-line method, until it
reaches its estimated residual value. The estimated residual value represents our best estimate of the fair value of the leased equipment at the end of the lease term. We base our initial estimate on
publicly available information, and also on our own projections and historical experience regarding expected resale values for the types of equipment leased.

It
is our accounting policy frequently to reevaluate our estimates and consider, at least quarterly, whether indications of impairment of our ability to recover the carrying value of our
investment in equipment on operating leases exist. If we determine that indications of impairment exist, we evaluate whether the total future cash flows, undiscounted and before interest, that we
expect to derive from the lease and the ultimate sale of the equipment are less than its carrying value. If the carrying value is higher than the expected total cash flows, the amount of the
impairment we recognize is equal to the excess of the carrying value of the equipment over its fair value. Further, if the estimated residual value of the equipment has changed significantly from
previous estimates, we will revise the amount of future depreciation expense to be recorded over the remaining term of the lease.

We
believe that the accounting estimate related to recoverability of the carrying value of our investment in equipment on operating leases is a critical accounting estimate because:



If
sales incentives remain an integral part of sales promotion - thereby reducing new vehicle prices - or if economic conditions deteriorate in our primary
markets, resale prices of used vehicles and,

45

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correspondingly,
the residual value of our leased equipment could be subject to continued downward pressure. If resale prices of used vehicles decline further, our future operating results are likely
to be adversely affected by increased depreciation expense or incremental impairment charges.

Since
the risk associated with the recoverability of our investment in equipment on operating leases is primarily attributable to our Services segment, the following information refers
to that segment.

As
a result of changes in estimates of residual values, our Services segment recognized a pre-tax impairment charge of [EURO]0.1 billion in 2003 and
[EURO]0.3 billion in 2002. We recorded these charges in the statement of income (loss) line item "Cost of sales." In 2001, no impairment charge was recorded.

The
recognition of impairment charges does not affect our reported cash flows. The rate of recovery of the carrying value of our investments in equipment on operating leases depends on
the cash we collect in the form of operating lease payments from our customers and the proceeds we derive from the sale of the vehicle when the lease matures. To the extent that used vehicle values
continue to decrease, we will realize less cash proceeds from sales of vehicles at lease end. In addition, the inability of customers to make their monthly lease payments could also adversely affect
our liquidity and capital resources.

Collectibility of Sales Financing and Finance Lease Receivables

We have sales financing and finance lease receivables, which consist primarily of retail installment sales contracts, finance lease contracts, and revolving
wholesale facilities secured by passenger cars and commercial vehicles. At December 31, 2003 and at December 31, 2002, our financial services business held substantially all of our sales
financing and finance lease receivables. We are exposed to collectibility risk if consumers or dealers default on these receivables or become insolvent and the values of the cars and commercial
vehicles securing these receivables are insufficient, after selling costs, to realize the full carrying values of the receivables. Collectibility risks impact the recoverability of our owned
(on-balance sheet) portfolio of finance receivables, through the allowance for credit losses, and the valuation of retained interests in finance receivables sold and securitized.



Our policy is to maintain an allowance for credit losses representing our best estimate as of the balance sheet date of the amount of losses incurred as of that
date in our sales finance and finance lease receivables portfolio. We base our estimate on a systematic, ongoing review and evaluation of our credit-risk. In performing this evaluation, we
take into account our historical loss experience, the size and composition of our portfolios, current economic events and conditions, the estimated fair value and adequacy of collateral and other
pertinent factors. When we evaluate homogeneous loan portfolios, we do that collectively, taking into consideration primarily historical loss experience, adjusted for the estimated impact of current
economic events and conditions, including fluctuations in the fair value and adequacy of collateral. We evaluate other receivables, such as wholesale receivables and loans to large commercial
borrowers, for impairment individually based on the fair value of available collateral. Increases in the allowance for credit losses reduce the net carrying value of the balance sheet line item
"Receivables from financial services" with a corresponding charge to the statement of income (loss) line item "Cost of sales."

We
believe that the accounting estimate related to the establishment of the allowance for credit losses is a critical accounting estimate because:



46

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Since
the risk associated with the collectibility of sales financing and finance lease receivables is almost exclusively attributable to our Services segment, the following information
refers to that segment.

We
consider the allowance for credit losses to be adequate based on information currently available and several assumptions, including expected average credit loss rate assumptions for
financing of 0.6% for Mercedes Car Group, 0.8% for Chrysler Group and 0.7% for Commercial Vehicles, at December 31, 2003. However, additional provisions may be necessary if:



Renewed
weakness in the U.S. or European economies could increase the likelihood that actual credit losses may exceed current estimates. To the extent that sales incentives remain an
integral part of sales promotion with the effect of reducing new vehicle prices, resale prices of used vehicles and, correspondingly, the collateral value of our Services segment's sales financing and
finance lease receivables could experience further downward pressure. If these factors require a significant increase in the allowance for credit losses, it could negatively affect our Services
segment's and the Group's future operating results.

At
December 31, 2003 and 2002, our Services segment's sales financing and finance lease receivables totaled [EURO]52.6 billion and [EURO]52.1 billion, respectively.
The allowance for credit losses associated with those receivables amounted to [EURO]1.3 billion at December 31, 2003, and [EURO]1.6 billion at December 31, 2002. Included
within cost of sales were net charges of [EURO]0.6 billion in 2003, [EURO]1.0 billion in 2002 and [EURO]1.4 billion in 2001 to increase the allowance for credit losses.

The
recognition of provisions for credit losses initially has no impact on our reported cash flows. The recoverability of our sales finance receivables and finance lease receivables
depends predominantly on installment collections over the respective contract terms. Our liquidity and capital resources could be
adversely affected if the inability of our customers to make their monthly installment payments exceeds our estimates. Decreases in collateral values would generally impact our future cash flows only
if customers default and we have to repossess the vehicles.



We regularly sell receivables to special purpose trusts in securitization transactions. In these transactions we usually retain residual beneficial interests in
the sold and securitized retail and wholesale finance receivables. The value of these retained interests depends on the present value of the estimated residual cash flows after repayment of all senior
interests in the sold receivables. We determine the value of our retained interests upon the sale of the receivables and at the end of each calendar quarter using discounted cash flow modeling. The
valuation methodology considers historical and projected principal and interest collections on the sold receivables, estimated future credit losses arising from the collection of the sold receivables,
and expected repayment of principal and interest on notes issued to third parties and secured by the sold receivables. To the extent the discounted expected future cash flows are less than the
carrying amount of a retained interest, we record an impairment charge if the situation is considered other-than-temporary, which reduces the net carrying value of the balance
sheet line item "Other receivables" with a corresponding charge to the statement of income (loss) line item "Revenues."

We
believe that the valuation of retained interests in sold receivables is a critical accounting estimate because:



47

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Since
the risk associated with retained interests in sold receivables is primarily attributable to our Services segment, the following information refers to that segment.

We
believe the amounts recognized on the balance sheet for our retained interests in sold receivables are appropriate based on information currently available and several assumptions,
including an expected composite average remaining credit loss rate of 1.2% at December 31, 2003. However, an additional impairment charge may be necessary if:



Renewed
weakness in the U.S. or European economies could increase the likelihood that actual credit losses exceed current estimates. To the extent that sales incentives remain an
integral part of sales promotion with the effect of reducing new vehicle prices, resale prices of used vehicles and, correspondingly, the collateral value realized upon repossession of defaulted sold
receivables could experience further downward pressure. If these factors result in a significant impairment of our ability to recover the carrying value of our retained interests, it could negatively
affect our future operating results and cash flows.

At
December 31, 2003 and 2002, the carrying value of our retained interests of our Services segment totaled [EURO]3.2 billion and [EURO]4.2 billion, respectively.
The unrealized gains associated with those retained interests amounted to [EURO]0.1 billion at December 31, 2003 and [EURO]0.2 billion at December 2002.

In
2003, the recorded impairment charge was insignificant. In 2002 and 2001 the impairment charges were [EURO]0.1 billion and [EURO]0.3 billion, respectively. Such
impairment charges are included in the consolidated statement of income (loss) line item "Revenues."

The
initial recognition of impairment charges to reduce the carrying value of our retained interests does not impact our reported cash flows. The realization of our retained interests
predominantly depends on the excess cash flows distributed by the special purpose trusts that purchased the sold receivables. The inability of customers to make their monthly installment payments to
the trusts could result in less excess cash flows that can be distributed by the trusts. To the extent that distributable excess cash flows are lower than our estimates, our liquidity and capital
resources could be adversely affected.

Realizability of Investments in EADS and Mitsubishi Motors Corporation (MMC)

We evaluate the recoverability of the carrying value of our significant equity method investments, primarily in EADS and MMC, when there is an indication of
potential impairment. When such an indication is present, we
record a write-down of the investment if and when the amount of its estimated realizable value falls below carrying value and this shortfall is considered
other-than-temporary. Indications of a potential impairment that would cause us to perform this evaluation include, but are not necessarily limited to, an inability of the
investee to sustain an earnings capacity that would justify the carrying amount of the investment, or a quoted market price per share that is significantly below than our carrying amount per share for
the investee for a sustained period of time.

Approximately
34% and 30% of the outstanding shares of common stock of EADS and MMC, respectively, trade publicly. A decline in the quoted market price of these shares below our carrying
amount or the existence of operating losses, however, is not necessarily indicative of a loss in value that is other-than-temporary. In determining whether a decline in the
investment's estimated realizable value is other-than-temporary, we consider the length of time and the extent to which such value has been less than the carrying value, the
financial condition and prospects of the investee, and our ability and intent to retain our investment in the investee for a period of time sufficient to allow for any anticipated recovery in value.
In the event that we determine that a decline in value is other-than-temporary, we recognize an impairment charge for the reduction in the value of the investment, which would
be reflected in the balance sheet line item "Investments and long-term financial assets" and the statement of income (loss) line item "Financial income (expense), net." Impairment charges
of this type are non-cash items and therefore would not impact our reported cash flows.

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We believe that the evaluation of the realizability of the carrying values of our investments in EADS and MMC is a critical accounting estimate because:



The
realization of the carrying value of our investment in EADS is primarily dependent on EADS' ability to compete successfully with its Airbus aircraft in the commercial aircraft
industry in terms of price, product quality and market acceptance of new models. A continued weakness in the airline industry, declines in residual values of leased aircraft or deteriorating financial
condition of EADS' major customers could have a significant impact on EADS. As a result, orders for new aircraft and the exercise rate of existing purchase options may be significantly lower in the
future which could adversely affect EADS' expected net cash flows, its ability to recover the carrying value of its assets and therefore our determination of realizable value. Consequently, both the
recognition of our proportionate share of EADS' future operating results - if such operating results were to deteriorate significantly from current trends - and an impairment
charge related to our ability to recover the carrying amount of our investment in EADS could adversely affect our operating results.

Since
the last months of 2002 and through September 30, 2003, the carrying value of our investment in EADS continuously and significantly exceeded its quoted market value, which
we believe was primarily due to the general weakness in worldwide economies, the aftermath of the events of September 11, 2001, the war in Iraq and the outbreak of SARS, all of which
significantly affected the airline industry. Despite a partial recovery of the share price from its all-time low of [EURO]6.50 per share in March 2003, the quoted market value of
our investment in EADS at September 30, 2003, was [EURO]3.5 billion, based on the market price per share of EADS of [EURO]13.24. The carrying value of our investment amounted to
[EURO]5.5 billion at that date. We determined that such impairment was other-than-temporary and we recognized an impairment charge of [EURO]1.96 billion in net
income at September 30, 2003 which is included in financial income (loss). At December 31, 2003, the carrying value of our investment in EADS was [EURO]3.6 billion and the quoted
market value of our investment was [EURO]5.0 billion, based on the quoted share price of [EURO]18.85.

We
consider our investment in MMC to be a strategically important component of our long-term strategy in Asia. The realization of the carrying value of our investment in MMC
is primarily dependent upon MMC's ability to improve its financial performance and market position. Key initiatives included in MMC's 2001 restructuring plan consist of management changes, workforce
reduction, elimination of excess production capacity and reduction of costs of purchased materials. MMC's ability to generate sufficient cash flows to recover the carrying value of its assets, satisfy
its financial obligations and stay competitive in the market place depends, among other factors, upon its ability to develop vehicles successfully and produce vehicles cost effectively and for the
consumer market to regain trust in MMC's products. Because it is essential that MMC have adequate sources of funding to meet its liquidity needs, this may require an additional equity infusion or some
form of credit support. MMC's forecasted operating cash flows and MMC management's estimates about MMC's ability to recover the carrying value of its assets could also change. Consequently, our
operating results could be adversely affected by both the recognition of our proportionate share of MMC's future operating results - if such operating results were to deteriorate
significantly from current trends - and an impairment charge related to our ability to recover the carrying amount of our investment in MMC.

From
the time that we made our initial investment in MMC in October 2000 until December 31, 2003, the carrying value per share has not significantly exceeded the quoted
market value per MMC share. At December 31, 2003, the carrying value of our investment in MMC was [EURO]1.0 billion. The quoted market value of our investment in MMC was
[EURO]0.9 billion, based on the quoted market price per share of MMC of [EURO]1.62 at December 31, 2003. Because of the strategic importance of our relationship with MMC, we have the
intent,

49

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and
the ability, to hold our investment in MMC for a period of time sufficient to allow us to recover our carrying value. Therefore, our estimate about our ability to recover the carrying value of our
investment in MMC has not changed and we have not recognized any impairment charges.

Sales Incentives

Sales incentives have become an integral part of our vehicle business, primarily with respect to the automobile business conducted by the Chrysler Group.
Therefore the following discussion refers solely to the Chrysler Group. Chrysler Group uses sales incentives to adjust market pricing in response to a number of market and product factors, including
pricing actions and sales incentives by competitors; economic conditions; the amount of excess industry production capacity; the intensity of market competition; and consumer demand for the product.
The Chrysler Group may offer a variety of sales incentive programs at any given point in time, including: cash offers to dealers and consumers, lease subsidies which reduce the consumer's monthly
lease payment, or reduced financing rate programs offered to customers through automotive financing partners.

At
the time of sale to the dealer, the Chrysler Group records as a reduction to revenue and as an accrued liability the estimated impact of sales incentives programs expected to be paid
to dealers and customers at the time of the retail sale. The amount by which revenue is reduced is based on assumptions about which of the incentive options available will be selected by the customer
as well as judgments about market conditions and the pricing actions of competitors. The accuracy of the Chrysler Group's accrued liability for the estimated cost
of sales incentives programs is dependent on a number of assumptions, including the specific incentives that dealers and consumers will select from available alternatives; the length of the reduced
rate financing contract that consumers select; and the value of programs that will be in effect when a vehicle is purchased by a consumer. The actual cost to the Chrysler Group of the sales incentives
programs may be different than the amount accrued. We adjust the accrued liability for sales incentives cost accordingly in the period that the retail sale occurs. These adjustments could positively
or negatively impact operating profit. Dealers sell the majority of vehicles they hold in inventory to consumers within a relatively short period of time, generally 90 calendar days or less from the
time they purchased the vehicles from Chrysler Group. Accordingly, we make adjustments to the accrual for sales incentives within a short period of time from when we estimated these accruals. This
adjustment could have a material effect on the Chrysler Group's operating results for the particular reporting period in which an adjustment of the estimated accrual is recorded.

The
recognition of accruals for sales incentives initially does not affect reported cash flows. Cash flows are negatively affected at the time the Chrysler Group pays the incentive,
which generally occurs shortly after the sale of the vehicle to the customer.

Liability for Product Warranties

We generally warrant our products against a variety of manufacturing and other defects for periods of up to seven years. We provide product warranties for
specific periods of time and/or usage of the product, and the warranties vary depending upon the type of product, the geographic location of its sale and other factors. The liability for product
warranties covers, for example, our various contractual warranty programs, goodwill coverage, recall campaigns and buyback commitments which could result from regulatory requirements. Our product
warranties are generally consistent with commercial practices. We record a liability for the expected cost of warranty-related claims when we sell the product to a third party, when we initiate a new
warranty program, or  depending on the reporting segment  upon lease inception. The amount of the warranty liability, which is included in the balance sheet
line item "Accrued liabilities," with a corresponding charge included as a component of "Cost of sales" in the statement of income (loss), reflects our estimate of the expected future costs of
fulfilling our obligations under the respective warranty plans. Our obligations for product warranties predominately affect our Chrysler Group segment, our Mercedes Car Group segment, and our
Commercial Vehicles segment. At December 31, 2003 and 2002, our total accrued liabilities for product warranties were [EURO]9.2 billion and [EURO]9.4 billion, respectively.

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We
base our estimates for accrued warranty costs primarily on historical warranty claim experience. Because portions of the products sold and warranted by us contain parts manufactured
(and warranted) by our suppliers, the amount of warranty costs accrued also contains an estimate of warranty claim recoveries from suppliers. Since we have to use a variety of assumptions when we
develop the estimates for accrued warranty costs, our estimated warranty obligations can vary depending upon the assumptions used.

We
believe that the determination of our liability for warranty obligations is a critical accounting estimate for each of our three vehicle segments because:



The
recording of the warranty obligation initially has no impact on our operating cash flows. Our operating cash flows change as we pay or settle actual warranty costs. Our liquidity and
capital resources could be negatively impacted if actual warranty costs exceed our estimates.

Pension and Other Post-retirement Benefits

As more fully described in Note 25a to our Consolidated Financial Statements, we provide pension benefits to substantially all of our hourly and salaried
employees, and also provide other post-retirement benefits to employees in North America. We actuarially determine these pension and other post-retirement benefit costs and
obligations using the projected unit credit method, and the amounts calculated depend on a variety of assumptions. These assumptions include discount rates, rates for expected returns on plan assets,
rates for compensation, mortality rates, retirement rates, health care cost trend rates and other factors. Under U.S. GAAP we accumulate and amortize over future periods actual results that differ
from the assumptions used. Therefore, actual results generally affect our recognized expense and recorded liabilities for pension and other post-retirement benefit obligations in future
periods.



At December 31, 2003, our projected pension benefit obligations exceeded plan assets on the Group level, which represents the "underfunded status" of our
plans, by [EURO]3.0 billion for all German plans and [EURO]2.8 billion for all non-German plans. The following table shows the effect of assumed changes in the rate of actual
return on plan assets, the discount rate and the expected long-term return rate on plan assets on the funded status of our pension benefit obligations at December 31, 2003:

German Plans

Non-German Plans([EURO] in millions)Actual 2003 return on plan assets +/- 5 percentage points

+/- 340

+/- 750Year-end 2003 discount rate +/- 25 basis points

+/- 360

+/- 540Long-term return rate on plan assets

None

None


51

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At December 31, 2003, pension benefit obligations increased our stockholders' equity by [EURO]0.6 billion for all German plans and
[EURO]0.1 billion for all non-German plans. The following table shows the effect of assumed changes in the rate of actual return on plan assets, the discount rate and the expected
long-term return rate on plan assets on our stockholders' equity at December 31, 2003:

German Plans

Non-German Plans([EURO] in millions)Actual 2003 return on plan assets +/- 5 percentage points

+/- 210

+/- 460Year-end 2003 discount rate +/- 25 basis points

+/- 200

+/- 330Long-term return rate on plan assets

None

None


In accordance with U.S. GAAP, we determine our pension benefit expense at the beginning of the calendar year based on assumptions which include a
weighted average expected rate of return on plan assets. The expected rate of return for U.S. plans is based on long-term actual portfolio results, historical total market returns and an
assessment of the expected returns for the asset classes in the portfolios. The assumptions are based on surveys of large asset portfolio managers and peer group companies of future return
expectations over the next ten years. Using "Modern Portfolio Theory", historical correlation, volatilities, and projected asset returns, we develop a target asset mix for these plans. We utilize a
ten year return history in our evaluation, consistent with SFAS 87 which refers to the expected rate as the long-term rate of return on plan assets. Accordingly, negative returns during a
one or two-year period may not significantly change the historical long-term rate of return such as to necessitate or warrant revision of the expected long-term rate of return.

We
employ a similar process to determine the expected rate of return on plan assets for German Plans. We use both capital market surveys as well as the expertise of major banks and
industry professionals to determine the expected rate of return on plan assets.

The
expected rate of return on plan assets set for 2001 and 2002 was 7.9% for German plans. The expected rate of return on plan assets set for 2001 and 2002 was 10.1% for
non-German Plans (primarily U.S. plans). During 2002, we decided to gradually shift the pension fund portfolio asset distribution towards a mix more weighted with fixed income assets than
in prior years, which by definition would modestly lower return expectations. In addition, at that time, our analysis of market trends caused management to believe that future long-term
returns for equities and fixed income assets would be lower than the returns experienced over the previous 25 years. As a result, we lowered the expected rates of return to 7.5% for German
plans and 8.5% for non-German plans as of January 1, 2003.

The
actual return on plan assets in 2003 was 14.6% for German plan assets and 23.0% for non-German plan assets. For 2004, we are assuming a weighted average
long-term rate of return on plan assets of 7.5% for German plans and 8.5% for non-German plans. We estimate that our total pension benefit expense in 2004 will approximate our
2003 expense of [EURO]0.8 billion.

Actual
experience different from that assumed and changes in assumptions can result in gains and losses that we have not yet recognized in our consolidated financial statements. We
recognize amortization of any unrecognized net gain or loss as a component of our pension expense for a year if, as of the beginning of the year, such unrecognized net gain or loss exceeds 10% of the
greater of (1) the projected benefit obligation or (2) the fair value at year end for the German plan's assets and the market-related value of the U.S. plan's assets. In such case, the
amount of amortization we recognize is the resulting excess divided by the average remaining service period of active employees expected to receive benefits under the plan. The following table

52

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shows
the effect of assumed changes in the rate of actual return on plan assets, the discount rate and the expected long-term return rate on plan assets on our pension benefit expense
(before income tax benefits) for the year ended December 31, 2004:

German Plans

Non-German Plans([EURO] in millions)Actual 2003 return on plan assets +/- 5 percentage points

+/- 50

+/- 25Year-end 2003 discount rate +/- 25 basis points

+/- 20

+/- 40Long-term return rate on plan assets +/- 50 basis points

+/- 40

+/- 110




At December 31, 2003, our accumulated post-retirement benefit obligations exceeded plan assets on the Group level by [EURO]13.4 billion,
which represents the "funded status" of our plans. Had the following occurred or been used, the funded status of our other post-retirement benefit obligations at December 31, 2003
would have been impacted accordingly:

All Plans([EURO] in millions)Actual 2003 return on plan assets +/- 5 percentage points

+/- 80Year-end 2003 discount rate +/- 25 basis points

+/- 440Assumed health care cost trend rate +/- 1 percentage point

+/- 120Long-term return rate on plan assets

None


Changes in the rate of actual return on plan assets, the discount rate and the assumed health care cost trend rate would not have an impact on our
net liability recognized in our consolidated balance sheet. Effects from changes in these assumptions would be included in our unrecognized net actuarial losses at December 31, 2003.

In
accordance with U.S. GAAP, we determine our other post-retirement benefit expense at the beginning of the calendar year. We have based our determination on a variety of
assumptions, including an expected rate of return on plan assets. U.S. post-retirement benefit plan assets utilize an asset allocation substantially similar to that of the pension assets.
The expected rate of return, therefore, is the same for both portfolios. Accordingly, the conclusions for expected rate of return on pension plan assets, noted above, also apply to
post-retirement plan assets.

For
the year ended December 31, 2003, our total other post-retirement benefit expense was [EURO]1.3 billion for all plans. We have determined our 2003 total
other post-retirement benefit expense using an assumed weighted average long-term expected rate of return on our plan assets of 8.5% as of January 1, 2003. The actual
return on plan assets in 2003 was a positive return of 22%.

Actual
experience different from that assumed and changes in assumptions can result in gains and losses that we have not yet recognized in our consolidated financial statements. We
recognize amortization of any unrecognized net gain or loss as a component of our total other post-retirement benefit expense for a year if, as of the beginning of the year, such
unrecognized net gain or loss exceeds 10% of the greater of the accumulated post-retirement benefit obligation or the market-related value of the plan's assets. In such case, the amount of
amortization we recognize is the resulting excess divided by the average remaining service period of active employees expected to receive benefits under the plan. For 2004, we will assume a weighted
average long-term rate of return on plan assets of 8.5%. As a result of amortization of unrecognized net losses from actual experience different from assumptions used we estimate that our
total other post-retirement benefit expense will increase by [EURO]0.1 billion in 2004, based on the assumptions used and our plan assets at December 31, 2003.

53

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In
addition to the estimated increase in our total other post-retirement expense of [EURO]0.1 billion in 2004, the following table shows the effect of assumed changes
in the rate of actual return on plan assets, the discount rate, the assumed health care cost trend rate and the expected long-term return rate on plan assets on our total other
post-retirement benefit expense (before income tax benefits) for the year ended December 31, 2004:

All Plans([EURO] in millions)Actual 2003 return on plan assets +/- 5 percentage points

+/- 15Year-end 2003 discount rate +/- 25 basis points

+/- 40Health care cost trend rate +/- 1 percentage point

+/- 20Long-term return rate on plan assets +/- 50 basis points

+/- 10


In December 2003, the U.S. government passed the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (The Act). The Act
introduces a prescription drug benefit under Medicare and an employer subsidy to sponsors of retiree health care benefit plans. In accordance with FASB Staff Position
106-1, we have elected to defer recognition of The Act, and accordingly, the accumulated post-retirement benefit obligation (APBO) and net post-retirement benefit
cost do not reflect the impact of The Act in 2003.

As
a sponsor of retirement health care plans, we expect to receive the employer subsidy provided for in The Act. Recognition of the subsidy will reduce the APBO and will also decrease
future service cost, interest cost, and loss recognition. The exact amount of such subsidies is subject to final rule-making by the U.S. government and cannot be precisely calculated;
however, preliminary estimates are that the recognition of the subsidy will reduce APBO in the magnitude of [EURO]0.7 billion. The Financial Accounting Standards Board (FASB) has not yet
resolved how the subsidy will be specifically accounted for. Therefore, final guidance could require a change to previously reported information.

For
a discussion of a potential impact on our liquidity and capital resources, please refer to the explanations we provide under the heading "Liquidity and Capital
Resources  Benefit Plan Obligations and Costs" in "Item 5. Operating and Financial Review and Prospects."

OPERATING RESULTS

We currently have five reportable business segments: (1) Mercedes Car Group; (2) Chrysler Group; (3) Commercial Vehicles;
(4) Services; and (5) Other Activities.

Information about Operating Profit

We measure the performance of our operating segments primarily through "Operating Profit". Our consolidated operating profit (loss) is the sum of the operating
profits and losses of our reportable segments, adjusted for consolidation and elimination entries. Please refer to Note 34 of our Consolidated Financial Statements for information about how we
determine segment operating profit and loss.



In the following tables we provide a reconciliation of the operating profits and losses of our reportable segments to the measures we use in our consolidated
statement of income (loss). Since some income and expense items (e.g., interest income and interest expense), are not recorded at or allocated to our reportable segments, we have reconciled the
operating profits (losses) to income (loss) before financial income for each

54

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reportable
segment. You can find a reconciliation of total segment operating profit (loss) to our consolidated income (loss) before income taxes, minority interests, discontinued operations,
extraordinary items, and the cumulative effect of changes in accounting principles in Note 34 to our consolidated financial statements.

|                                      |                                                                                                                                     | Year Ended December 31, 2003
([EURO] in millions) |     
|------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------- | ----
|
|Operating Profit (Loss)               |                                                                                                                                     | 3,126                                             |     
|                                      | Pension and post-retirement benefit income (expenses), other than current and prior service costs and settlement/curtailment losses |                                                   | (136
|                                      | Operating (profit) loss from affiliated and associated companies and financial (income) loss from related operating companies       |                                                   | (116
|                                      | Operating (profit) loss from discontinued operations                                                                                |                                                   | 0   
|                                      | Pretax gains from the sale of operating businesses and discontinued operations                                                      |                                                   | 0   
|                                      | Miscellaneous items                                                                                                                 |                                                   | 0   
|Income (loss) before financial income |                                                                                                                                     | 2,874                                             |     

---

|                                      |                                                                                                                                     | Year Ended December 31, 2002
([EURO] in millions) |    
|------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------- | ---
|
|Operating Profit (Loss)               |                                                                                                                                     | 3,020                                             |    
|                                      | Pension and post-retirement benefit income (expenses), other than current and prior service costs and settlement/curtailment losses |                                                   | (15
|                                      | Operating (profit) loss from affiliated and associated companies and financial (income) loss from related operating companies       |                                                   | (64
|                                      | Operating (profit) loss from discontinued operations                                                                                |                                                   | 0  
|                                      | Pretax gains from the sale of operating businesses and discontinued operations                                                      |                                                   | 0  
|                                      | Miscellaneous items                                                                                                                 |                                                   | 16 
|Income (loss) before financial income |                                                                                                                                     | 2,957                                             |    

---

55

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|                                      |                                                                                                                                     | Year Ended December 31, 2001
([EURO] in millions) |    
|------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------- | ---
|
|Operating Profit (Loss)               |                                                                                                                                     | 2,951                                             |    
|                                      | Pension and post-retirement benefit income (expenses), other than current and prior service costs and settlement/curtailment losses |                                                   | 84 
|                                      | Operating (profit) loss from affiliated and associated companies and financial (income) loss from related operating companies       |                                                   | (11
|                                      | Operating (profit) loss from discontinued operations                                                                                |                                                   | 0  
|                                      | Pretax gains from the sale of operating businesses and discontinued operations                                                      |                                                   | 0  
|                                      | Miscellaneous items                                                                                                                 |                                                   | 273
|Income (loss) before financial income |                                                                                                                                     | 3,297                                             |    

---

"Pension and post-retirement benefit income (expenses), other than current and prior service costs and settlement/curtailment losses"
is the sum of interest cost, the expected return on plan assets and the amortization of unrecognized net actuarial gains or losses. Operating profit (loss) excludes these components of the net
periodic pension and post-retirement benefit income (expense), since they are driven by financial factors and do not reflect the operating performance of the segments. The significant
change compared with 2002 was primarily a result of reduced expected returns on plan assets mainly due to a reduction in the long-term return rate on plan assets.

"Operating
profit (loss) from affiliated and associated companies and financial income (loss) from related operating companies" includes the contributions to earnings from our operating
investments, which we report as a component of financial income (loss), net, in the consolidated statements of income (loss). We allocate these contributions to the operating profit (loss) of the
respective segments. In 2003, this resulted in a negative overall contribution to operating profit of [EURO]19 million. The decrease compared with the prior year was primarily a result of a
negative contribution to earnings from our equity investment in Mitsubishi Motors Corporations and lower positive contributions from our equity investment in EADS.

"Operating
profit (loss) from discontinued operations" shows the operating profit of MTU Aero Engines, which we are reporting as discontinued operations in our consolidated statements of
income (loss).

"Pretax
gains from the sale of operating businesses and discontinued operations" pertains to gains and losses from the sale of minority shareholdings held as operating investments which
we allocate to the operating profit (loss) of the respective segments and show in the consolidated statements of income (loss) under "Financial income (loss), net". In 2003, we also allocated the
pretax gain of [EURO]1.0 billion realized on the sale of our MTU Aero Engines business to this item.

"Miscellaneous
items" includes income and expenses which do not affect our operating business. The increase compared with the prior year was almost solely due to the settlement of a
consolidated class-action case relating to the merger of Daimler-Benz and Chrysler. In this regard, we recognized a charge of $300 million (approximately [EURO]240 million
adjusted for currency translation effects) in 2003. We have applicable insurance policies aggregating approximately [EURO]200 million, to which extent we are seeking reimbursement of the
settlement payment. We will recognize any reimbursement as income in the period we receive it.

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Overview of Business Segment Revenues and Operating Profit (Loss)

You should read the following discussion in conjunction with Notes 1 and 34 to the Consolidated Financial Statements, "Application of Critical Accounting
Policies" in Item 5 and "Risk Factors" in Item 3. For a discussion of the hedging instruments and hedging techniques we employ, please refer to the discussion in "Item 11. Quantitative and Qualitative
Disclosures About Market Risk." and to Note 32 to our Consolidated Financial Statements.

The
following table presents revenues and operating profit (loss) for each of our five business segments during the last three fiscal years.

DaimlerChrysler Group
Business Segment Revenues and Operating Profit (Loss)

|                    |       | Year Ended December 31, |        
|------------------- | ----- | ----------------------- | -------
|
|
|
|Mercedes Car Group  |       | 51,446                  |        
|Chrysler Group      |       | 49,321                  |        
|Commercial Vehicles |       | 28,517                  |        
|Services            |       | 14,037                  |        
|Other Activities    |       | 440                     |        
|Eliminations        |       | (7,324                  | )      
|                    |       |                         |        
|                    | Total |                         | 136,437
|                    |       |                         |        

---

---

In the following paragraphs, we describe the more significant acquisitions and dispositions that affected the year-to-year
comparability of revenues and operating profit (loss) of our Commercial Vehicles, Services and Other Activities segments. You can find additional information about these transactions in "Item 4.
Information on the Company" and in Note 4 to the Consolidated Financial Statements.



In March 2003, we purchased a 43% non-controlling interest in Mitsubishi Fuso Truck and Bus Corporation (MFTBC) for [EURO]764 million in
cash for which we account using the equity method of accounting.

As
a result of this transaction, our operating profit includes our 43% share of MFTBC's operating profit since the date of this acquisition.



In January 2002, we exercised our option to sell our 49.9% interest in T-Systems ITS to Deutsche Telekom AG for [EURO]4.7 billion. The
sale closed in March 2002 and resulted in a gain of [EURO]2.5 billion that we included in our 2002 operating profit. Our 2002 operating profit also included our 49.9% share of the
operating profit of T-Systems ITS through February 28, 2002.

57

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On December 31, 2003, we sold MTU Aero Engines GmbH and its subsidiaries to the investment company Kohlberg, Kravis and Roberts & Co. Ltd.
(KKR) for [EURO]1,450 million, consisting of [EURO]1,052 million in cash and net debt of [EURO]398 million being assumed. We further agreed to provide a vendor loan to KKR in the
amount of [EURO]175 million, reducing our cash proceeds from the transaction to [EURO]877 million. The sale of MTU Aero Engines also triggered a compensation payment of
$250 million to United Technologies Corporation, the parent company of Pratt & Whitney, which we paid in January 2004. This compensation payment released us from financial
obligations, which we had undertaken in order to facilitate a pre-existing strategic alliance between MTU Aero Engines and Pratt & Whitney. As required by U.S. GAAP, we reclassified
and are reporting the results of MTU Aero Engines and the gain on the sale of this business as discontinued operations in our consolidated statements of income (loss). We have adjusted our
consolidated statements of income (loss) for all periods presented to reflect this presentation.

As
a result of this transaction, we recorded a gain of [EURO]1.0 billion in the operating profit of the Other Activities segment.

In
April 2001, we sold a controlling 60% interest in our TEMIC automotive electronics business, which is now known as Conti Temic microelectronic GmbH, to Continental AG for
[EURO]0.4 billion. The sale agreement gave Continental the option to purchase our 40% interest, and it gave us the option to sell our 40% interest to Continental. The initial transaction
resulted in a gain of [EURO]0.2 billion which is included in our 2001 operating profit.

On
April 1, 2002, we exercised our option to sell our 40% interest in Conti Temic microelectronic GmbH for [EURO]0.2 billion, which resulted in a gain of
[EURO]0.2 billion. We included this gain in our 2002 operating profit.

As
a result of these transactions, revenues and operating profit of our Other Activities segment include revenues and the entire operating profit of the TEMIC automotive electronics
business only through March 31, 2001. For the period April 1, 2001 through March 31, 2002, the operating profit of this segment includes our 40% share of the operating profit of
Conti Temic microelectronic GmbH.

In
October 2000, we acquired a 34% non-controlling equity interest in Mitsubishi Motors Corporation. In June 2001, we purchased AB Volvo's 3.3% equity interest
in Mitsubishi Motors. As a result, our non-controlling equity interest in Mitsubishi Motors increased to 37.3%. We account for the non-controlling interest we hold in
Mitsubishi Motors using the equity method of accounting. Rights offerings by Mitsubishi Motors in 2003 and 2002 reduced our equity interest to 37.0%.

As
a result of these transactions, our Other Activities segment includes our 34% share of Mitsubishi Motors' operating results through May 31, 2001 and our respective higher share
of Mitsubishi Motors' operating results for the periods thereafter.

On
May 1, 2001, we transferred control of our rail systems activities (Adtranz) to the Canadian company Bombardier Inc. for $725 million. This transaction resulted
in a pre-tax gain of [EURO]0.3 billion that we included in our 2001 operating profit.

As
a consequence of this transaction, revenues and operating profit of our Other Activities segment include revenues and operating profit of Adtranz only through April 30, 2001.

The
segment discussions on pages 63 to 68 describe in more detail the specific market factors which affected the operating results of our segments.

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2003 Compared With 2002

We computed the percentages in the following discussion using unrounded amounts and numbers. Some of these percentage expressions may, therefore, not reflect the
precise relationships between the stated rounded amounts and numbers.



On December 31, 2003, we sold MTU Aero Engines. As required by U.S. GAAP, we are reporting the operating results of MTU Aero Engines and the gain on the
sale of this business as discontinued operations. We have adjusted our consolidated statements of income (loss) for all periods presented to reflect this presentation.



Our revenues declined 7% from [EURO]147.4 billion in 2002 to [EURO]136.4 billion in 2003. The major driver for that decrease was currency
translation effects. Since our reporting currency is the euro, we translate revenues that our subsidiaries derive in foreign currencies into euros which exposes us to translation risk. The currency
translation effects accounted for [EURO]15 billion of revenue decline in 2003 and were primarily caused by the appreciation of the euro against the U.S. dollar. Following is a brief overview of
revenues of our primary business segments.

Mercedes Car Grouprevenues increased 3% to [EURO]51.4 billion due primarily to strong unit sales of the S-Class,
E-Class and CLK-Class, partially offset by lower unit sales of A-Class, C-Class and M-Class vehicles.

Chrysler Grouprevenues decreased 18% to [EURO]49.3 billion, primarily as a result of the appreciation of the euro against the U.S.
dollar and higher sales incentives. In addition to reduced vehicle prices as a result of higher sales incentives, lower worldwide factory unit sales also contributed to lower revenues. Measured in
U.S. dollars, the principal functional currency of the Chrysler Group, revenues decreased by 2%.

Commercial Vehiclesrevenues of [EURO]28.5 billion increased only slightly from [EURO]28.4 billion in 2002, reflecting
continued weak market conditions in Western Europe and South America. The slight increase in revenues in Western Europe was offset by lower revenues in North America caused by currency translation
effects.

Servicesrevenues were [EURO]14.0 billion in 2003, an 11% decline compared to [EURO]15.7 billion in 2002. The decrease in
revenues mainly resulted from the appreciation of the euro against the U.S. dollar and lower aggregate operating lease transactions as increased customer financing incentives in the United States
resulted in a migration of customer preference from operating leases to sales finance transactions.



In 2003, cost of sales were [EURO]109.9 billion compared to [EURO]119.6 billion in 2002, an 8% decrease. The decrease in cost of sales was primarily
due to the appreciation of the euro against the U.S. dollar. In addition, more favorable refinancing conditions and, in the aggregate, lower impairment charges on equipment on operating leases and
risk provisions for finance lease receivables in the Services segment contributed to that decrease. As cost of sales decreased more than revenues, our gross margin improved to 19.4% in 2003 compared
to 18.8% in 2002. In addition, we experienced lower costs for raw material and manufacturing supplies, especially in the Chrysler Group segment, however, these savings were almost offset by higher net
periodic pension and post-retirement benefit costs.

In
2003, we recorded impairment charges of [EURO]0.1 billion relating to property, plant and equipment of the Mercedes Car Group production facility in Juiz de Fora, Brazil. This
charge reflects the excess of the carrying

59

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amounts
of those assets over their fair market value. Cost of sales in 2002 also included charges of [EURO]0.5 billion relating to restructuring measures and impairment charges on
long-lived assets within the Commercial Vehicles segment.



Selling expenses were [EURO]11.8 billion in 2003 compared to [EURO]12.0 billion in 2002, a 2% decrease. Selling expenses as a percentage of revenues
were 8.6% in 2003 compared to 8.1% in 2002. The decrease in selling expenses was mainly the result of the translation effect caused by the appreciation of the euro against the U.S. dollar.



General administrative expenses of [EURO]5.4 billion remained virtually flat on the prior year level. General administrative expenses as a percentage of
revenues were 3.9% in 2003 and 3.6% in 2002, reflecting the limited variability of these expenses. Slightly higher personnel expenses, primarily caused by higher net periodic pension and
post-retirement benefit costs, resulted in a moderate increase of general administrative expenses. Currency translation effects, mainly as a result of the appreciation of the euro against
the U.S. dollar, almost entirely offset this increase.



Other expenses were [EURO]0.7 billion in 2003 and [EURO]0.8 billion in 2002. The 2003 amount includes a charge of [EURO]0.2 billion, adjusted
for currency translation effects, that we incurred to settle a class action lawsuit relating to the merger of Daimler-Benz AG and Chrysler in 1998. In 2002, other expenses included charges
of [EURO]0.2 billion resulting from losses on the sale of a significant portion of our capital services portfolio. The 2002 amount also includes impairment charges related to other portions of
our capital services portfolio held for sale.



Research and development funded by us amounted to [EURO]5.6 billion in 2003 compared to [EURO]5.9 billion in 2002. The 6% decrease in research and
development expense was mainly attributable to the appreciation of the euro against the U.S. dollar, partially offset by higher development costs for new or updated Mercedes-Benz passenger
car and smart models.



Other income was [EURO]0.7 billion in 2003 and [EURO]0.8 billion in 2002. Other income includes primarily gains from the sale of property, plant and
equipment (2003: [EURO]58 million, 2002: [EURO]48 million), rental income, other than relating to financial services leasing activities (2003: [EURO]110 million, 2002:
[EURO]197 million), and employee vehicle leasing programs at the Chrysler Group (2003: [EURO]71 million, 2002: [EURO]81 million).



As a result of the Chrysler Group turnaround plan, which was initiated in 2001, we recorded restructuring charges of [EURO]0.5 billion in 2003 and
[EURO]0.7 billion in 2002. The additional charges in 2003 as well as the charges incurred in 2002 related to costs associated with the idling, closing or disposal of several manufacturing
facilities, ongoing workforce reduction measures, and revisions of prior estimates based on current information or actual settlements. The charges appear as a separate line item in the consolidated
statement of income (loss). Otherwise, we would have reported [EURO]462 million (2002: [EURO]680 million) of these costs in cost of sales and [EURO]7 million (2002:
[EURO]14 million) in selling, administrative and other expenses.

60

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After achieving net financial income in 2002 of [EURO]2.2 billion, we recorded a net financial loss of [EURO]2.8 billion in 2003. Financial income
(loss), net, is comprised of "Income (loss) from investments, net," "Interest income (expense), net" and "Other financial income (loss), net."

Income (loss) from investments, net.In 2003, we recorded a net loss from investments totaling [EURO]2.5 billion while we posted
net income from investments of [EURO]2.6 billion in 2002. The net loss in 2003 was primarily the result of the [EURO]2.0 billion impairment on our investment in EADS which we recognized
in the third quarter of 2003 when we determined that the decline in the stock price of EADS shares was other-than-temporary. In addition, higher losses from the equity method
investment in Mitsubishi Motors Corporation and lower gains from the equity method investment in EADS contributed to the overall loss from investments in 2003. In 2002, we also recognized gains from
sales of our interest in T-Systems ITS ([EURO]2.5 billion) and Conti Temic microelectronic ([EURO]0.1 billion) which significantly affected the 2002 amount.

Interest expense (net).In 2003 and 2002 we recorded net interest expense of [EURO]0.4 billion and [EURO]0.3 billion,
respectively.

Other financial income (loss), net.In 2003, other financial income largely offset other financial loss, while we recorded other net
financial expense of [EURO]0.1 billion in 2002. Other financial income (loss), net, in 2002 included a foreign currency exchange loss of [EURO]0.1 billion in 2002 relating to the
depreciation of the Argentine peso in relation to the U.S. dollar, and a gain of [EURO]0.1 billion from the sale of securities.



In 2003, we recorded income tax expense of [EURO]1.0 billion compared to income tax expense of [EURO]1.1 billion in 2002. We computed income tax
expense in 2003 based on pre-tax income of [EURO]0.6 billion and in 2002 based on pre-tax income of [EURO]5.9 billion. Our effective tax rate was significantly
higher compared to 2002, primarily due to the non-tax deductible write-down of [EURO]2.0 billion of our equity investment in EADS combined with lower pretax income in
2003 and tax-free gains on the sale of our remaining equity interests in T-Systems ITS and Conti Temic microelectronic in 2002. In 2003, non-tax deductible losses
from our equity method investments had an additional negative impact on our income tax rate. The income tax expense of [EURO]1.0 billion in 2003 reflects a tax benefit and related interest of
[EURO]0.6 billion in connection with agreements reached with the tax authorities in the U.S. on tax matters attributable to years 1986 to 1998. This tax benefit was partially offset by a tax
expense and related interest of [EURO]0.3 billion, which mainly represents the accrual of tax costs associated with current year developments in the examination of the German tax Group's tax
filings by the German tax authorities for the years 1994 to 1998. Please refer to Note 9 to our Consolidated Financial Statements for additional information.



Net loss from continuing operations was [EURO]0.4 billion in 2003 compared to net income from continuing operations of [EURO]4.8 billion in 2002.
Basic and diluted loss per ordinary share from continuing operations was [EURO]0.41 in 2003, compared to basic and diluted earnings per share of [EURO]4.76 and [EURO]4.74 in 2002.



On December 31, 2003, we sold MTU Aero Engines. As required by U.S. GAAP, we are reporting the operating results of MTU Aero Engines and the gain on the
sale of that business as discontinued operations. We have adjusted our consolidated statements of income (loss) for all periods presented to reflect this presentation requirement. Accordingly, we
reclassified net income of [EURO]14 million in 2003 and net income of [EURO]82 million in 2002. As a result of the sale of MTU Aero Engines, we realized an after-tax profit
of [EURO]0.9 billion

61

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in
2003, which is reflected in the December 31, 2003 consolidated statement of income (loss) as "Income on disposal of discontinued operations." Basic and diluted earnings per share from
discontinued operations, including the gain on the disposal of MTU Aero Engines in 2003, were [EURO]0.88 in 2003 and [EURO]0.08 in 2002.



Variable Interest Entities: Adoption of FIN 46R As of December 31, 2003, we adopted the regulations of FIN 46R for
the consolidation of special purpose entities, for which we are the primary beneficiary. The cumulative effect of adopting FIN 46R was a charge, net of taxes, of [EURO]30 million in 2003
([EURO]0.03 per share).

Goodwill and Other Intangible Assets: Adoption of SFAS 142 We adopted SFAS 142 on January 1, 2002. The
transitional goodwill impairment charge recognized in the consolidated statement of income (loss) in 2002 was [EURO]159 million ([EURO]0.16 per share), which represents our proportionate share
of the transitional goodwill impairment charges from equity method investees, primarily EADS.



Net income was [EURO]0.4 billion in 2003 compared to [EURO]4.7 billion in 2002. Basic and diluted earnings per ordinary share were [EURO]0.44 in
2003, while in 2002 the basic and diluted earnings per ordinary share were [EURO]4.68 and [EURO]4.67.

The
significant change in net income was primarily attributable to three major effects. The after-tax gain from the sale of MTU Aero Engines ([EURO]0.9 billion) and
the non-tax deductible impairment charge on EADS ([EURO]2.0 billion) in 2003 as well as the after-tax gains on the sales transactions involving T-Systems ITS
([EURO]2.5 billion) and Conti Temic microelectronic ([EURO]0.1 billion) in 2002. Taken together, these effects accounted for [EURO]3.7 billion of the [EURO]4.3 billion
decline in net income from 2002 to 2003, and for a decline of [EURO]3.68 and [EURO]3.66 of basic and diluted earnings per share, respectively.



In 2003, our operating profit was [EURO]5.7 billion compared to [EURO]6.9 billion in the previous year.

The
results of both years were significantly affected by charges for restructuring activities, impairments recognized on fixed assets, and gains realized on the sale of investments. In
2003, Chrysler Group's operating profit was impacted by additional restructuring charges of [EURO]0.5 billion, while the corresponding amount in the prior year was [EURO]0.7 billion. The
operating profit of the prior year was also affected by restructuring charges of [EURO]0.3 billion at the Commercial Vehicles segment and by impairments on fixed assets of
[EURO]0.5 billion relating to the Commercial Vehicles segment ([EURO]0.2 billion) and the Services segment ([EURO]0.3 billion). In 2002, the Services segment incurred additional
costs of [EURO]0.1 billion as a result of the decision of the Argentine government to reform its financial system and monetary policy. The sale of MTU Aero Engines had a positive pretax effect
of [EURO]1.0 billion on the operating profit in 2003. In the prior year, our operating profit included gains totaling [EURO]2.7 billion from the sale of our investments in
T-Systems ITS ([EURO]2.5 billion) and Conti Temic microelectronic ([EURO]0.2 billion).

Excluding
the above income and expense items, our operating profit decreased compared to the prior year, primarily due to the performance of the Chrysler Group. The main reasons for the
decline in Chrysler Group's operating profit were lower vehicle shipments and increased sales incentives as a result of the continuation of extremely tough competition in the U.S. market. Additional
factors with a negative effect on the Group's operating profit were the negative contribution to earnings from Mitsubishi Motors Corporation and lower earnings from EADS.

In
contrast, the Mercedes Car Group, Commercial Vehicles and Services segments were able to increase their operating profit compared with the prior year. Mercedes Car Group surpassed the
high level of earnings it achieved in the prior year, due in particular to an improved model mix with the full availability of the new E-Class and the CLK coupe, and continuing strong
sales of the S-Class and the SL-Class. The significant

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improvement
in earnings achieved by Commercial Vehicles was mostly the result of consistent and successful implementation of efficiency-improvement programs in all businesses. The higher earnings of
the Services segment resulted not only from, in the aggregate, lower impairment charges on equipment on operating leases and reduced risk provisions for finance lease receivables, but also from the
favorable development of refinancing conditions in its major markets.

The
table on page 57 shows the business segment contributions to Group operating profit. The segment discussions on pages 63 to 68 describe in more detail the specific market factors
which affected the operating results of the segments.



Revenues of our Mercedes Car Group segment increased 3% from [EURO]50.2 billion in 2002 to [EURO]51.4 billion in 2003.

Total
unit sales of the Mercedes Car Group segment declined from 1,232,300 in 2002 to 1,216,900 in 2003. Unit sales of Mercedes-Benz vehicles decreased from 1,110,000 in 2002
to 1,092,200 in 2003 while smart reported a 2% increase in unit sales to 124,700 from 122,300 in 2002.

The
increase in total segment revenues resulted primarily from the full availability of the E-Class sedan and the CLK coupe and from the successful market introduction of the
new E-Class station wagon in 2003. Continued strong performance of our S-Class family, particularly the SL-Class, and increased customer preference for better
equipped, higher priced vehicles in the S-Class and E-Class categories also supported the increase. These positive effects on revenues were partially offset by lifecycle based
declines in unit sales of the A-Class, C-Class and M-Class, due in part to anticipated model changes.

At
[EURO]16.9 billion, 2003 revenues in Germany were 1% lower than in 2002. Unit sales fell 6% in an overall declining German market. Germany continues to be the most important
market for our Mercedes Car Group segment with 2003 unit sales of 390,100. These sales represented 32% of the segment's worldwide unit sales compared to 34% in 2002. In the other Western European
countries, Mercedes Car Group revenues rose 5% to [EURO]14.7 billion while unit sales were 1% higher, reaching 422,800 units. The disproportionate changes in revenues relative to unit sales in
Germany and the rest of Western Europe is predominantly the result of a shift in the model mix towards higher priced vehicles.

In
the United States, revenues decreased by [EURO]0.3 billion or 3% to [EURO]11.0 billion, while unit sales increased 2% to 218,400. The decrease in revenues was mainly due
to the appreciation of the euro against the U.S. dollar which resulted in lower revenue numbers after we translated U.S. dollar revenues into euros. At [EURO]2.4 billion, revenues in Japan
reached the level of the previous year while unit sales decreased 3% to 45,800. In Asia (excluding Japan), revenues increased 20% to [EURO]2.7 billion while unit sales of 50,200 represented a
7% increase over the 2002 unit sales of 47,000. The disproportionately more positive development of revenues in both geographic markets was primarily the result of a favorable shift in the model mix
towards higher priced vehicles.

In
2003, our Mercedes Car Group segment recorded an operating profit of [EURO]3.1 billion, 3.5% more than in the previous year. As higher priced Mercedes-Benz vehicles
made up a larger percentage of units sold, the resulting increase in revenues more than compensated for the negative effects of lower overall unit sales of Mercedes-Benz vehicles and
higher pre-production costs. The successful introduction in 2003 of the E-Class station wagon and the CLK convertible, coupled with continued strong sales performance of the
E-Class sedan, the CLK coupe and the S-Class family were primarily responsible for this result. In addition to the new models introduced in 2003, the higher
pre-production costs related mainly to several new or updated future Mercedes-Benz passenger cars, including the successor model of the SLK, the successors of our
A-Class, M-Class and S-Class, the facelifted version of the C-Class, the new E-Class coupe CLS and the new cross-over model GST.
The operating loss from the smart was about the same as in 2002. The loss in 2003 was in part

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attributable
to higher pre-production costs for smart vehicles, primarily the smart forfour, which were only partially offset by the positive earnings effects arising from the successful
introduction of the smart roadster models.

The
2003 operating profit of the Mercedes Car Group segment also includes an impairment charge of [EURO]0.1 billion related to the recoverability of carrying values of property,
plant and equipment of our production facility in Brazil and a pre-tax gain of [EURO]0.1 billion resulting from the sale of our 50% interest in the joint venture CTS Fahrzeug-Dachsysteme GmbH.
The impairment charge was the result of the planned discontinuation of the assembly of C-Class and A-Class vehicles. Beginning in 2006, we plan to produce a new smart SUV in
this facility.



The Chrysler Group reported revenues of [EURO]49.3 billion compared with revenues of [EURO]60.2 billion for 2002. This decrease in revenues is
primarily the result of the appreciation of the euro against the U.S. dollar, higher sales incentives and lower worldwide factory unit sales. Measured in U.S. dollars, the principal functional
currency for the Chrysler Group, revenues were 2% lower than in 2002.

In
2003, the Chrysler Group sold 2.64 million units, 7% fewer than in the year before. The impact of the decrease in unit sales was partially offset by an increase in average
revenue per unit sold. Worldwide factory unit sales decreased as a result of lower dealer orders in 2003 and the shutdown of the Brampton plant for model changeover to the new Chrysler 300 series and
Dodge Magnum vehicles. U.S. dealer inventory levels were substantially unchanged at 521,000 units at December 31, 2003 compared to 517,000 units at December 31, 2002. In the NAFTA
region, total sales decreased 7% to 2,457,800 units. Unit sales outside the NAFTA region increased 5% to 180,100 in 2003. In 2003, the Chrysler Group launched the all-new Chrysler
Pacifica, Chrysler Crossfire and Dodge Durango.

In
2003, the Chrysler Group had an operating loss of [EURO]0.5 billion compared with an operating profit of [EURO]0.6 billion in 2002. The 2003 operating results included
restructuring charges of [EURO]0.5 billion while the 2002 operating results reflected restructuring charges of [EURO]0.7 billion, each relating to actions taken under the turnaround plan
described below. The 2003 decline in profitability was primarily the result of lower vehicle shipments and higher sales incentives reflecting the continued intense competitive pressures in the North
American market. Higher sales incentives were only partially offset by increased vehicle pricing. Increased sales incentives resulted not only in reduced profit margins from vehicle shipments, but
also contributed to increased marketing expense provisions for dealer inventories and declining residual values relating to fleet sales with guaranteed minimum resale values. The 2003 decline in
profitability was partially offset by net cost improvements from material price reductions and productivity.

In
2003, Chrysler Group and Services agreed to adjust rates charged on consumer financing programs and lease residual value risk sharing arrangements due to increasingly competitive
financing options. These adjustments reduced the operating loss by [EURO]0.2 billion at the Chrysler Group.

The
Chrysler Group continued to make progress in 2003 with respect to the key initiatives announced in February 2001 as part of a turnaround plan designed to improve its operating
and financial performance. Key initiatives over the three year period, 2001 through 2003, included a) supplier cost reductions for materials and services, b) revenue initiatives through
new performance-based dealer incentive programs and programs highlighting product quality, c) workforce reductions and d) increased manufacturing efficiencies. Revenue improvements from
the turnaround plan have been less than anticipated. However, the Chrysler Group has overachieved savings through its successful cost reduction programs to partially offset the negative impact on
revenue resulting from the intensely competitive North American market.

As
a result of the turnaround plan, the Chrysler Group recorded restructuring charges of [EURO]0.5 billion in 2003 and [EURO]0.7 billion in 2002. The restructuring charges
recognized in 2003 and 2002 were primarily for

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costs
associated with the idling, closing or disposal of manufacturing facilities and workforce reduction measures. The Chrysler Group expects cash payments of [EURO]0.2 billion in 2004 for
previously recorded charges. The Chrysler Group may recognize charges in 2004 relating to the divestiture or closure of selected operations.

For
a further discussion of the Chrysler Group's turnaround plan, see "Notes to Consolidated Financial Statements  Turnaround Plan for the Chrysler Group" in "Item
18. Financial Statements."

In
September 2003, DaimlerChrysler Corporation and the United Automobile, Aerospace, and Agricultural Implement Workers of America (UAW) agreed on terms for a
four-year collective bargaining agreement that covers more than 58,000 hourly and salaried workers in the United States which provides that each eligible employee will receive
increased compensation over the term of the agreement. The agreement also provides for increases in pension benefit rates, and changes in certain health care, supplemental unemployment and other
benefits. The agreement allows DaimlerChrysler Corporation to close or sell several specified facilities as an exception to a general limitation on its ability to close plants, reduce employment
levels, or dispose of operations that constitute a UAW bargaining unit. It also provides flexibility in establishing job assignments and work rules in order to increase productivity in plants. For a
further discussion of DaimlerChrysler Corporation's agreement with the UAW, see "Employees and Labor Relations" in "Item 6. Directors, Senior Management and Employees".

The
Chrysler Group's sales are principally in the U.S. and Canadian automotive markets. Retail industry sales (including fleet sales) of new cars and trucks in the U.S. and Canada were
18.6 million units in 2003, compared with 18.9 million units in 2002, a decrease of 2%. Retail industry sales would likely have decreased further were it not for extensive sales
incentives, such as discounted financing and lease rates, and consumer cash rebates.

The
U.S. and combined U.S. and Canada retail sales and market share data for the Chrysler Group in 2003 and 2002 are set forth below:

|                                    |  | Year Ended December 31, | 
|----------------------------------- |  | ----------------------- | 
|
|U.S. Retail Market1                 |  |                         | 
|Car sales                           |  | 456,676                 | 
|Car market share                    |  | 6.1%                    | 
|Truck sales (including minivans)    |  | 1,670,775               | 
|Truck market share                  |  | 17.6%                   | 
|Combined car and truck sales        |  | 2,127,451               | 
|Combined car and truck market share |  | 12.5%                   | 
|U.S. and Canada Retail Market1      |  |                         | 
|Combined car and truck sales        |  | 2,340,386               | 
|Combined car and truck market share |  | 12.6%                   | 

---

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Retail sales of cars for the Chrysler Group in the U.S. market for 2003 decreased 13% compared to 2002 while the total car market in the U.S.
decreased by 7% compared to 2002. Retail sales of trucks for the Chrysler Group in the U.S. market for 2003 were approximately the same as in 2002 while the total truck market in the U.S. increased by
4% compared to 2002. The decrease in retail sales and related market share is a result of increased competition in all market segments. While competition in the Chrysler Group's primary markets is
expected to remain intense, management believes the Chrysler Group's market and financial performance will improve as a result of the introduction of new products in 2004 and future years as well as
improving economic conditions, primarily in the U.S.

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Despite weak market conditions in our core markets Western Europe and North America in 2003, our Commercial Vehicles segment was able to achieve total revenues of
[EURO]28.5 billion, about the same as in the previous year. Unit sales were 501,000 compared to 485,400 in 2002, a 3% increase. This growth reflects a 9% rise in truck unit sales from 214,000
units to 232,400 units, and a 12% increase in bus unit sales from 25,300 units to 28,300 units, partially offset by a 2% decline in van unit sales from 246,100 units to 240,300 units.

In
Germany, revenues increased 2% from [EURO]6.8 billion in 2002 to [EURO]6.9 billion in 2003. Unit sales decreased 2% to 101,700 vehicles. Truck unit sales grew 2% and bus
unit sales were 17% higher while van unit sales in Germany decreased by 4%. In the rest of Western Europe (excluding Germany), revenues increased by 1% to [EURO]7.0 billion in 2003 while
overall unit sales in Western Europe (excluding Germany) declined 9% to 147,800 units.

In
the NAFTA region, revenues of the Commercial Vehicles segment decreased 7% to [EURO]9.3 billion in 2003, due to the appreciation of the euro against the U.S. dollar, while unit
sales climbed 14% to 134,200 units. Our Commercial Vehicles segment derives a substantial portion of its revenues in currencies other than the euro which exposes it to currency translation risk. The
appreciation of the euro against the U.S. dollar led to lower revenues after translating U.S. dollar denominated revenues into euros. Measured in U.S. dollars, revenues increased due to overall higher
unit sales. In the United States, unit sales improved 15%, primarily as a result of higher sales of vans and Class 6/7 trucks. We achieved this positive result despite a number of potentially adverse
factors. These included slower than expected economic growth at the beginning of the year, high
energy prices throughout the year, and higher unemployment rates. In addition, customers had accelerated truck purchases from 2003 into 2002 due to new emission requirements that became effective on
October 1, 2002.

Despite
continuing difficult economic conditions in our main South American markets Argentina and Brazil, we were able to increase sales in South America by 9% to 40,200 units in 2003
from 37,000 units in 2002. Due in large part to currency translation effects, our revenues from sales in this region decreased 3% to [EURO]1.1 billion in 2003.

In
2003, our Commercial Vehicles segment reported an operating profit of [EURO]0.9 billion compared to an operating loss of [EURO]0.3 billion in 2002. The 2002 result
included impairment and restructuring charges totaling [EURO]0.5 billion as follows: As a result of our long-term product and production strategy, we wrote off manufacturing and
tooling equipment which led to an impairment charge of [EURO]0.2 billion. Due to continued weak demand for commercial vehicles worldwide, we reduced our workforce resulting in charges totaling
[EURO]0.2 billion. We recognized restructuring charges of [EURO]0.1 billion in connection with the discontinuation of the wire harness production at one of our German plants.

Excluding
these impairment and restructuring charges, our operating results improved significantly due to the consistent and successful implementation of our efficiency programs in all
our commercial vehicle businesses. In the fall of 2003, Freightliner/Sterling/Thomas Built Buses successfully completed its turnaround plan, one year ahead of the original schedule. Our operating
results also improved as a result of the successful market launch of the new Mercedes-Benz Actros, increased unit sales of Freightliner trucks and buses in the NAFTA markets which resulted
in market share gains, increased unit sales of buses in Western Europe that also resulted in market share gains, and the positive business development at Mitsubishi Fuso Truck & Bus Corporation
(MFTBC). Our 43%-share in MFTBC's results is included in the Commercial Vehicles segment's operating profit since April 2003.

All
businesses of this segment contributed positive results to operating profit. Contrary to this positive development, the appreciation of the euro against the U.S. dollar burdened our
operating profit in euro since improved operating results denominated in U.S. dollars translated into lower operating results measured in euro.

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Revenues of our Services segment declined from [EURO]15.7 billion in 2002 to [EURO]14.0 billion in 2003. This decline was predominantly the result
of currency translation effects, primarily the appreciation of the euro against the U.S. dollar. The continued migration of customer preference from operating leases to sales finance transactions also
contributed to this decline.

Activities
of our Services segment in the NAFTA region contributed [EURO]7.9 billion or 56% of total revenues in 2003, a 21% decrease compared to 2002. This decrease in the
contribution rate was primarily due to the adverse currency translation effects caused by the appreciation of the euro against the U.S. dollar, but also reflected the current preference of U.S.
customers for sales financing transactions over operating leases.

Revenues
generated in Germany were [EURO]3.8 billion or 27% of total revenues in 2003 compared to [EURO]3.5 billion or 22% of total revenues in 2002. Revenues derived from
service activities in the European Union (excluding Germany) amounted to [EURO]1.7 billion or 12% of total revenues in 2003 compared to [EURO]1.6 billion or 10% in 2002.

In
2003, our Services segment processed new leasing and finance contracts with a total value of [EURO]47.5 billion compared to [EURO]51.8 billion in 2002. Substantially all
of this 8% decline in value is the result of negative currency translation effects. At December 31, 2003, our Services segment managed a portfolio of leasing and finance contracts of
[EURO]98.2 billion, 10% less than the portfolio of [EURO]109.3 billion managed at December 31, 2002. Excluding foreign currency translation effects, the portfolio volume in 2003
was 2% above last year's level.

Operating
profit of our Services segment decreased to [EURO]1.2 billion in 2003 from [EURO]3.1 billion in 2002. The substantial decrease in operating profit was
attributable to a significant [EURO]2.5 billion gain in 2002 from the sale of our 49.9% equity interest in T-Systems ITS to Deutsche Telekom, which was only partially offset by
impairment charges of [EURO]0.3 billion that arose from the sale of a significant portion of our capital services portfolio and anticipated losses on expected sales of other portions of our
capital services portfolio. The [EURO]0.3 billion impairment charge includes actual and expected losses on the recoverability of lease receivables and assets under operating leases. The 2002
result also included a [EURO]0.1 billion charge to recognize the further impairment of our ability to recover the carrying value of assets affected by the depreciation of the Argentine peso
following the decision of the Argentine government to reform its financial system and monetary policy. Excluding these factors, a year-to-year comparison of this segment's
operating profit shows a significant improvement. In 2003, favorable refinancing conditions resulting from continued low interest rates in our main markets, had a positive influence on operating
profit. In addition, we further optimized our risk management system in the automotive leasing and sales financing
business. This resulted in aggregate lower impairment charges related to equipment on operating leases and risk provisions on finance lease receivables in 2003 compared to 2002. These positive effects
were partially absorbed by a [EURO]0.2 billion loss arising from our participation in the development of an electronic toll collection system for commercial vehicles above 12t GVW using German
highways. In addition, Services and the Chrysler Group agreed to adjusted rates charged on subsidized financing programs due to increasingly competitive financing options as well as an adjustment of
risk sharing related to existing lease residual provisions which reduced operating profit by [EURO]0.2 billion at the Services segment in 2003.



On December 31, 2003, as part of our ongoing strategy to focus on our core automotive business, we sold MTU Aero Engines GmbH and its subsidiaries which
resulted in a pre-tax gain of [EURO]1.0 billion. As required by U.S. GAAP, we are reporting the operating results of MTU Aero Engines and the gain on the sale of this business as discontinued
operations. We have adjusted our consolidated statements of income (loss) for all periods presented to reflect this presentation.

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Revenues
reported in our Other Activities segment originated primarily from the MTU Aero Engines business and are now presented separately as "discontinued operations." The remaining
revenues in our Other Activities segment relate to continuing operations which mostly relate to our real estate business. Revenues from our ongoing businesses were [EURO]0.4 billion in 2003
compared to [EURO]0.5 billion in 2002. Revenues generated by MTU Aero Engines amounted to [EURO]1.9 billion in 2003 and [EURO]2.2 billion in 2002.

The
operating results of this segment include our share in the operating results of our equity method investees EADS and Mitsubishi Motors Corporation. In addition, the segment includes
our real estate and corporate research activities, our holding and finance companies and, through December 31, 2003, the operating result of MTU Aero Engines.

In
2003, our Other Activities segment recorded an operating profit of [EURO]1.3 billion compared to [EURO]0.9 billion in 2002. The 2003 result includes a pre-tax gain of
[EURO]1.0 billion from the sale of MTU Aero Engines, and in 2002 a pre-tax gain of [EURO]0.2 billion resulting from the disposal of our 40% interest in Conti Temic microelectronic. The
sale of MTU Aero Engines also triggered a compensation payment of $250 million to United Technologies Corporation, the parent company of Pratt & Whitney, which we paid in
January 2004. This compensation payment released us from financial obligations, which we had undertaken in order to facilitate a pre-existing strategic alliance between MTU Aero
Engines and Pratt & Whitney. The expense of this obligation was netted against the 2003 gain on the disposal of MTU Aero Engines.

Excluding
gains from the sale of businesses in both 2003 and 2002, our Other Activities segment achieved a significantly lower operating profit in 2003 compared to 2002. This was due in
part to our share in the operating loss of Mitsubishi Motors, that was primarily attributable to lower revenues of the Mitsubishi Motors Group in North America and increased provisions for credit
risks and residual-value risks in its U.S. financial services business. In addition, EADS's operating profit contribution did not reach the level of the prior year. The general weakness of the airline
business, increased development costs for the Airbus A380 program and a goodwill impairment charge at EADS relating to its space division were the primary reasons for EADS's lower 2003 operating
result. The [EURO]2.0 billion impairment charge we recorded in the third quarter of 2003 after concluding that the decline in EADS's stock price was
other-than-temporary, did not affect our operating profit. To a lesser degree, lower operating profit of MTU Aero Engines compared to the prior year also contributed to the
decrease of operating profit of the Other Activities segment. The decline in MTU Aero Engines' operating profit was mainly due to the weakness in the airline industry, the depreciation of the U.S.
dollar, higher development costs and restructuring expenses.

2002 Compared With 2001

On December 31, 2003, we sold MTU Aero Engines. As required by U.S. GAAP, we are reporting the operating results of MTU Aero Engines as discontinued
operations. We have adjusted our consolidated statements of income (loss) for all periods presented to reflect this presentation.



Our revenues declined 2% from [EURO]150.4 billion in 2001 to [EURO]147.4 billion in 2002. Our 2001 revenues included revenues of
[EURO]1.4 billion generated by Adtranz and the TEMIC automotive electronics business prior to the dispositions of Adtranz and a 60% controlling interest in TEMIC which were not repeated in
2002. Currency translation effects were another reason for the decline in 2002. Since our reporting currency is the euro, we have to translate revenues our subsidiaries derive in foreign currencies
into euros which exposes us to translation risk. The currency translation effects on 2002 revenues were mainly caused by the appreciation of the euro against the U.S. dollar, which accounted for a
[EURO]4.4 billion revenue decline. Higher revenues in the Mercedes Car Group partially offset these negative effects.

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Mercedes Car Grouprevenues increased 5% to [EURO]50.2 billion due primarily to strong unit sales of the new E-Class
launched in 2002, partially offset by lower unit sales of C-Class vehicles.

Chrysler Grouprevenues decreased 5% to [EURO]60.2 billion, primarily as a result of the appreciation of the euro against the U.S.
dollar and higher sales incentives. The decrease in revenues caused by currency translation and reduced vehicle prices as a result of sales incentives was partially offset by a revenue improvement
attributable to higher unit sales. Measured in U.S. dollars, the principal functional currency for the Chrysler Group, revenues were approximately the same as in 2001.

Commercial Vehiclesrevenues were virtually flat at [EURO]28.4 billion, mainly reflecting weak markets in Western Europe and South
America. A decrease in revenues in Western Europe and South America was partially offset by higher unit sales and revenues in North America where new U.S. emission laws, which became effective on
October 1, 2002, accelerated customer purchases of Class 8 heavy trucks into the first nine months of 2002.

Servicesrevenues were [EURO]15.7 billion, a 7% decline compared to [EURO]16.9 billion in 2001. The decrease in revenues
mainly resulted from the appreciation of the euro against the U.S. dollar and lower aggregate operating leases as increased customer financing incentives in the United States resulted in a migration
of customer preference from operating leases to sales finance transactions.

Other Activitiesrevenues from continuing operations decreased from [EURO]2.0 billion to [EURO]0.5 billion. Revenues for
2001 included revenues of [EURO]1.4 billion generated by Adtranz and TEMIC prior to the dispositions of Adtranz and a 60% controlling interest in TEMIC which were not repeated in 2002.



In 2002, cost of sales amounted to [EURO]119.6 billion compared to [EURO]126.2 billion in 2001, a 5% decrease. The decrease in cost of sales was
mainly due to the appreciation of the euro against the U.S. dollar and cost reductions and other actions realized as part of the turnaround plan at Chrysler Group. Cost reductions and lower customer
satisfaction costs at Chrysler Group were the primary driver of the increase in gross margin from [EURO]24.1 billion (16.1%) in 2001 to [EURO]27.7 billion (18.8%) in 2002. Cost of sales
in 2002 included charges of [EURO]0.5 billion relating to restructuring measures and impairment charges on long-lived assets within the Commercial Vehicles segment. Due to declining
resale prices of used passenger cars in North America, in 2002 we also recorded [EURO]0.3 billion of impairment charges for the recoverability of the carrying values of leased vehicles. In
2001, cost of sales included charges totaling [EURO]0.5 billion in respect of Freightliner's turnaround plan initiated in 2001 and costs associated with unforeseen market developments as well
as to the decision of the Argentine government to reform its financial system and monetary policy.



Selling expenses were [EURO]12.0 billion in 2002 compared to [EURO]11.8 billion in 2001, a 2% increase. Selling expenses as a percentage of revenues
were 8.1% in 2002 compared to 7.8% in 2001. The increase in selling expenses was mainly the result of higher promotion expenses in connection with newly launched vehicles at the Mercedes Car Group and
Commercial Vehicles segments. This increase was partially offset by lower selling expense at the Chrysler Group due to ongoing cost reduction efforts.



General administrative expenses declined 3% from [EURO]5.5 billion in 2001 to [EURO]5.3 billion in 2002. General administrative expenses as a
percentage of revenues were 3.6% in 2002 and 3.7% in 2001. The decrease in general administrative expenses was mainly the result of cost reduction measures.

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Other expenses were [EURO]0.8 billion in 2002 and [EURO]1.0 billion in 2001. This decrease resulted from the application of SFAS 142. As a
result of the adoption of SFAS 142, we no longer amortize goodwill and, therefore, it no longer affects net income. Other expenses included charges of [EURO]0.2 billion in each of 2002
and 2001 in connection with losses on the sale of a significant portion of our capital services portfolio. The 2002 amount also includes impairment charges related to other portions of our capital
services portfolio that we currently hold for sale.



Research and development funded by us amounted to [EURO]5.9 billion in 2002 compared to [EURO]5.8 billion in 2001. The increase in research and
development expense was mainly attributable to higher pre-production costs for new or updated Mercedes-Benz passenger car and smart models.



Other income was [EURO]0.8 billion in 2002 and [EURO]1.2 billion in 2001. Other income includes primarily gains from the disposition of
subsidiaries, rental income and gains from the sale of property, plant and equipment. The decrease of other income was primarily attributable to the sales transactions in 2001 involving Adtranz and
TEMIC, which led to gains totaling [EURO]0.5 billion in 2001.



As a result of the Chrysler Group turnaround plan, which was initiated in 2001, we recorded additional restructuring charges in 2002 of [EURO]0.7 billion.
These additional charges related to costs associated with the idling, closing or disposal of several manufacturing facilities in 2002 and 2003, ongoing workforce reduction measures and revisions of
prior estimates based on current information or actual settlements. The charges appear as a separate line item in the consolidated statement of income (loss). Otherwise, [EURO]680 million of
these costs would have appeared in cost of sales and [EURO]14 million in selling, administrative and other expenses.



Financial income (net) increased from [EURO]0.2 billion in 2001 to [EURO]2.2 billion in 2002. Financial income (net) is comprised of "Income from
investments," "Interest expense" and "Other financial income (expense)."

Income from investmentswas [EURO]2.6 billion in 2002 and [EURO]0.3 billion in 2001. This increase was mainly the result of
higher gains from the sales of businesses. In 2002, we recognized gains from sales of our interest in T-Systems ITS ([EURO]2.5 billion) and Conti Temic microelectronic
([EURO]0.1 billion). Income from investments in 2001 included our [EURO]0.7 billion share of the gain arising at EADS in connection with its formation of Airbus SAS, and a gain of
[EURO]0.3 billion from the sale of our remaining 10% interest in debitel to Swisscom. In 2001, we had a [EURO]0.2 billion share of the restructuring charges of Mitsubishi Motors and an
impairment charge of [EURO]0.1 billion relating to our e-business activities.

Interest expense (net)remained at [EURO]0.3 billion consistent with the prior year.

Other financial expensewas [EURO]0.1 billion in 2002 versus other financial income of [EURO]0.1 billion in 2001. The
decrease of other financial income (loss) was predominantly the result of lower gains of [EURO]0.2 billion from the sale of securities and the contribution of securities to the DaimlerChrysler
Pension Trust. Other financial income (net) included foreign currency exchange losses of [EURO]0.1 billion in both 2002 and 2001 relating to the depreciation of the Argentine peso in relation
to the U.S. dollar.

70

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In 2002, we recorded income tax expense of [EURO]1.1 billion compared to an income tax benefit of [EURO]0.8 billion in 2001. We computed income tax
expense in 2002 based on pre-tax income of [EURO]5.9 billion. The income tax benefit in 2001 resulted from a pre-tax loss of [EURO]1.7 billion. Accordingly, our
effective tax rate decreased from 51.3% in 2001 to 18.8% in 2002. The lower tax rate in 2002 compared to 2001 was primarily due to the tax-free gains on the sale of our interests in
T-Systems ITS and Conti Temic microelectronic. The higher tax rate in 2001 was the result of the pre-tax loss reported in 2001 offset by the tax-free gains realized
from the sale of our remaining interest in debitel, the sale of a 60% controlling interest in TEMIC and the sale of our Adtranz rail systems business. Due to the pre-tax loss reported in
2001, the tax-free gains had the effect of increasing the tax rate.



Net income from continuing operations was [EURO]4.8 billion in 2002 compared to a net loss from continuing operations of [EURO]0.8 billion in 2001.
Basic and diluted earnings per ordinary share from continuing operations were [EURO]4.76 and [EURO]4.74 in 2002, compared to basic and diluted loss per share of [EURO]0.76 and [EURO]0.76 in 2001.



On December 31, 2003, we sold MTU Aero Engines. As required by U.S. GAAP, we are reporting the operating results of MTU Aero Engines as discontinued
operations. We have adjusted our consolidated statements of income (loss) for all periods presented to reflect this presentation. Accordingly, we reclassified net income of [EURO]0.1 billion as
discontinued operations in both years. Basic and diluted earnings per share from discontinued operations were [EURO]0.08 in 2002 and [EURO]0.10 in 2001.



In accordance with U.S. GAAP, amortization of goodwill no longer affects net income (loss). Instead goodwill is tested for impairment at least annually. In
connection with the transitional impairment evaluation, as required by SFAS 142, we recorded an impairment charge of [EURO]0.2 billion in 2002 which related solely to companies for which
we account using the equity method, primarily EADS. The impairment charge represents our proportionate share of our equity method investees' transitional goodwill impairment charge resulting from the
adoption of SFAS 142.



Net income was [EURO]4.7 billion in 2002 compared to a net loss of [EURO]0.7 billion in 2001. Basic and diluted earnings per ordinary share were
[EURO]4.68 and [EURO]4.67 in 2002, while in 2001 the basic and diluted loss per ordinary share was [EURO]0.66.

In
accordance with the new U.S. accounting standard SFAS 142, amortization of goodwill and intangible assets with indefinite useful lives no longer affect net income. If we had
been able to apply this standard from January 1, 2001, our reported net loss for 2001 would have been [EURO]0.4 billion lower and our reported basic and diluted loss per share would have
been reduced by [EURO]0.40.



In 2002, our operating profit was [EURO]6.9 billion compared to an operating loss of [EURO]1.3 billion in the previous year.

In
2002, operating profit included a gain of [EURO]2.5 billion from the sale of our interest in T-Systems ITS and a gain of [EURO]0.2 billion from the sale of
our interest in Conti Temic microelectronic. In connection with the sale

71

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of
a significant portion of our capital services portfolio and anticipated losses on other capital services portfolios held for sale, we recorded a charge of [EURO]0.3 billion. This amount
included actual and expected losses on the recoverability of lease receivables and assets under operating leases.

As
a result of idle capacities in a German commercial vehicles assembly plant, we recorded an impairment charge of [EURO]0.2 billion related to the recoverability of carrying
values of manufacturing equipment and tooling.

Associated
with the implementation of the Chrysler Group turnaround plan in 2001, we recognized additional restructuring charges of [EURO]0.7 billion in operating profit.
Additional restructuring charges of [EURO]0.3 billion resulting from the prolonged weakness of the economy, mainly in Western Europe and South America, and the decision to discontinue the wire
harness production in a German plant affected the 2002 operating results of our Commercial Vehicles segment.

As
a result of the depreciation of the Argentine peso following the decision of the Argentine government to reform its financial system and monetary policy, we recorded a charge in 2002
of [EURO]0.1 billion to recognize the further impairment of our ability to recover the carrying value of certain assets.

The
2001 operating loss includes charges of [EURO]3.1 billion relating to the turnaround plan of the Chrysler Group, charges of [EURO]0.5 billion relating to Freightliner's
turnaround plan and special costs associated with unforeseen market developments. It also includes our proportionate [EURO]0.4 billion share of Mitsubishi Motors Corporation's restructuring
charges.

In
addition, in 2001 we recognized a [EURO]0.9 billion share of EADS' gain arising in connection with the formation of Airbus SAS and a gain of [EURO]0.3 billion from the
sale of our remaining 10% equity interest in debitel to Swisscom. Further gains resulted from the sale of Adtranz ([EURO]0.3 billion) and the sale of a 60% controlling interest in our TEMIC
automotive electronics business ([EURO]0.2 billion). These gains were partially offset by a charge of [EURO]0.2 billion relating to the recoverability of lease receivables in
anticipation of the intended sale in 2002 of the commercial real estate and asset-backed lending portfolio of our Services segment.

Due
to the decision of the Argentine government to reform its financial system and monetary policy and to introduce a floating exchange rate relative to the U.S. dollar effective
January 11, 2002, our Services segment recognized a loss of [EURO]0.1 billion in 2001.

An
impairment charge of [EURO]0.1 billion relating to our e-business activities affected 2001 operating results of which [EURO]10 million related to activities
of the Mercedes Car Group segment, [EURO]34 million to activities of the Chrysler Group segment and [EURO]31 million to activities of the Commercial Vehicles segment.

In
addition to the aforementioned gains and losses included in operating profit in 2002 and 2001, improved operating results at Chrysler Group, which were mainly due to cost reduction
measures and other actions taken as part of the turnaround plan, predominantly contributed to the increase in our operating profit in 2002. The other segments also increased their operating results.
The table on page 57 shows the business segment contributions to Group operating profit. The segment discussions on pages 72 to 77 describe in more detail the specific market factors which affected
the operating results of the segments.

As
a result of adopting SFAS 142, our operating profit/loss is no longer affected by the amortization of goodwill. If we had applied this standard from January 1, 2001, we
would have reported a [EURO]0.4 billion lower operating loss in 2001.



Revenues of our Mercedes Car Group segment increased [EURO]2.5 billion, or 5%, from [EURO]47.7 billion in 2001 to [EURO]50.2 billion in 2002.

72

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Total
unit sales of the Mercedes Car Group segment rose slightly from 1,229,700 in 2001 to 1,232,300 in 2002. Unit sales of Mercedes-Benz vehicles decreased slightly from
1,113,500 in 2001 to 1,110,000 in 2002 while smart showed a 5% increase in unit sales to 122,300 from 116,200 in 2001.

The
increase in total segment revenues resulted primarily from the successful market introduction in 2002 of the new E-Class sedan which increased E-Class unit
sales. Continued strong performance of our S-Class family, particularly the SL-Class, and increased customer preference for better equipped, higher priced vehicles in the
S-Class, E-Class and M-Class categories also supported the increase. In addition, higher unit sales of the smart contributed to the increase in revenues. The
overall increase in revenues was partially offset by a lifecycle-based decline in unit sales of the C-Class family.

At
[EURO]17.0 billion, 2002 revenues in Germany were 3% higher than in 2001 even though unit sales fell 4% in an overall declining German market. Germany continues to be the most
important market for our Mercedes Car Group segment with 2002 unit sales of 417,000. These sales represented 34% of the segment's worldwide unit sales compared to 35% in 2001.

In
the other Western European countries, Mercedes Car Group revenues rose 9% to [EURO]14.0 billion while unit sales were 4% higher, reaching 418,900 units. These increases were
primarily due to higher demand for passenger cars in the UK, Italy, France, and Spain. The disproportionate increase in revenues is predominantly a result of a shift in the model mix towards higher
priced vehicles.

In
the United States, revenues increased by [EURO]0.2 billion or 2% to [EURO]11.3 billion, while unit sales remained at the prior year's level with 213,700. The revenue
increase in the United States was mainly due to the strong sales performance of the successful S-Class family and the new E-Class and CLK coupe. The SL-Roadster and
the newly introduced products caused a favorable shift in the model mix towards higher priced vehicles.

At
[EURO]2.4 billion, revenues in Japan were up 14% despite a 2% decrease in unit sales. The disproportionate increase in revenues was the result of currency effects and a
favorable shift in the model mix towards higher priced vehicles. In Asia (excluding Japan), revenues increased 8% to [EURO]2.3 billion while unit sales of 47,000 represented a 3% increase over
the 2001 unit sales of 45,700.

In
2002, our Mercedes Car Group segment recorded an operating profit of [EURO]3.0 billion, slightly above the previous year. A shift to higher priced Mercedes-Benz
vehicles, including the E-Class sedan, which we successfully introduced in 2002, the CLK coupe and the strong sales performance of the SL-Roadster were largely responsible for this result.
Higher unit sales of the smart and further efficiency improvements also contributed to the increase. Slightly lower overall unit sales of Mercedes-Benz vehicles and higher
pre-production costs partially offset these improvements. We incurred higher pre-production costs for new or updated Mercedes-Benz passenger car and smart models,
especially the new E-Class and CLK coupe, the successor models of the E-Class station wagon and the CLK convertible, the successors of A-Class and
M-Class, and the facelifted version of the S-Class. In addition, the new Maybach and the new smart roadster, smart roadster coupe and the smart four-seater
contributed to increased pre-production costs.



The Chrysler Group reported revenues of [EURO]60.2 billion compared with revenues of [EURO]63.5 billion for 2001. This decrease in revenues is
primarily the result of the appreciation of the euro against the U.S. dollar and higher sales incentives, partially offset by an increase in unit sales (factory shipments). Measured in U.S. dollars,
the principal functional currency for the Chrysler Group, revenues were approximately the same as in 2001.

In
2002, the Chrysler Group sold 2.82 million units, 2% more than in the year before. Worldwide factory unit sales increased as a result of stronger dealer orders in 2002.
Consistent with industry patterns, U.S. dealer inventory levels rose from 442,000 units at December 31, 2001 to 517,000 units at December 31, 2002. In the NAFTA region, total sales
increased 3% to 2,650,700 units. Unit sales outside the NAFTA region

73

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decreased
to 172,000 in 2002, a decrease of 14,300 units or 8%. The Chrysler Group successfully launched the all-new Dodge Ram 2500/3500 pick-up trucks at two plants in North
America with total shipments of all Ram pick-ups increasing by 90,600 units from 2001.

The
Chrysler Group's operating profit was [EURO]0.6 billion in 2002 compared with an operating loss of [EURO]5.3 billion in 2001. The 2002 operating results included
restructuring charges of [EURO]0.7 billion and the 2001 operating results reflected restructuring charges of [EURO]3.1 billion, each relating to actions taken under the turnaround plan
described below. Cost reductions and other actions taken as part of the turnaround plan, lower customer satisfaction costs and increased shipments also benefited the 2002 operating results, partially
offset by net vehicle price reductions. Net vehicle price reductions included higher vehicle pricing which was more than offset by higher sales incentives.

In
February 2001, the Chrysler Group announced a turnaround plan designed to improve its financial performance and market position. Key initiatives over the period 2001 through
2003 include a workforce reduction, elimination of excess plant capacity, reduction of the cost of purchased materials and services, a new dealer performance-based incentive program and the
implementation of a product creation process, which reorganized the former platform teams into product innovation teams. By adjusting its cost structure, workforce and production capacity while
continuing to develop exciting products, the Chrysler Group expects to position itself for profitable growth in the world automotive markets.

As
a result of the turnaround plan, the Chrysler Group recorded restructuring charges of [EURO]0.7 billion in 2002 and [EURO]3.1 billion in 2001. The restructuring charges
in 2001 primarily related to workforce reductions, asset write-downs and contract cancellation costs. The additional restructuring charges recognized in 2002 were for costs associated with the idling,
closing or disposal of several manufacturing facilities in 2002 and 2003 and ongoing workforce reduction measures as well as revisions of estimates based upon current information or actual
settlements. The Chrysler Group may recognize additional restructuring costs in 2003 relating to the divestiture of selected assets. The Chrysler Group expects cash payments of $0.3 billion in
2003 for the previously recorded charges.

The
Chrysler Group surpassed the turnaround plan's break-even operating target for 2002, excluding restructuring charges of [EURO]0.7 billion. The savings the Chrysler
Group achieved through its successful cost reduction programs more than offset the negative impact on revenue resulting from the intensely competitive North American market.

For
a further discussion of the Chrysler Group's turnaround plan, see "Description of Business Segments  Chrysler Group" in "Item 4. Information on the Company."

The
Chrysler Group derives revenues and operating profit principally from the U.S. and Canadian automotive markets. Retail industry sales (including fleet sales) of new cars and trucks
in the U.S. and Canada were 18.9 million units in 2002, compared with 19.1 million units in 2001, a decrease of 1%. Retail industry sales may have decreased further were it not for the
introduction of more extensive sales incentives, such as zero percent financing, beginning in late 2001.

74

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The
U.S. and combined U.S. and Canada retail sales and market share data for the Chrysler Group in 2002 and 2001 are set forth below:

|                                    |  | Year Ended December 31, | 
|----------------------------------- |  | ----------------------- | 
|
|U.S. Retail Market1                 |  |                         | 
|Car sales                           |  | 527,056                 | 
|Car market share                    |  | 6.6%                    | 
|Truck sales (including minivans)    |  | 1,678,390               | 
|Truck market share                  |  | 18.4%                   | 
|Combined car and truck sales        |  | 2,205,446               | 
|Combined car and truck market share |  | 12.9%                   | 
|U.S. and Canada Retail Market1      |  |                         | 
|Combined car and truck sales        |  | 2,452,223               | 
|Combined car and truck market share |  | 13.0%                   | 

---

---

Retail sales of cars for the Chrysler Group in the U.S. market for 2002 decreased 6% compared to 2001 and the total car market in the U.S.
decreased by 5% compared to 2001. Retail sales of trucks for the Chrysler Group in the U.S. market for 2002 decreased 2% compared to 2001 while the total truck market in the U.S. increased by 1%
compared to 2001. The decrease in retail sales and related market share of trucks is a result of increased competition, particularly in the minivan, full-size sport utility and
mid-size pick-up truck segments. The decrease in the Chrysler Group's truck sales was partially offset by an increase in retail sales in the large pick-up truck
segment.



In 2002, revenues of our Commercial Vehicles segment were virtually flat at [EURO]28.4 billion. Unit sales were 485,400 compared to 492,900 in 2001, a 2%
decline. This decline reflects a 5% decrease in unit sales of vans to 246,100 units, an 8% decline in unit sales of buses to 25,300 units, partially offset by a 3% increase in truck sales to 214,000
units.

In
Germany, revenues went down 6% to [EURO]6.8 billion from [EURO]7.2 billion in 2001. Unit sales decreased 3% to 103,300 vehicles, mainly due to fewer truck sales. Truck
unit sales went down 16% and bus unit sales 8% while van sales in Germany increased 4%. Due to weak commercial vehicle markets in the rest of Western Europe, primarily in France, Belgium and Spain,
revenues were down 3% at [EURO]7.0 billion while overall unit sales in Western Europe (excluding Germany) declined 5% to 161,900 units.

In
the NAFTA region revenues of the Commercial Vehicles segment increased 5% to [EURO]10.0 billion in 2002, while unit sales climbed 11% to 118,000 units. In the United States,
unit sales improved 12%, primarily as a result of sales of Class 8 trucks which customers accelerated into 2002 due to new emission requirements that became effective on October 1, 2002.
In addition, 2001 unit sales were unusually low as dealers focused on reducing their existing inventories. The overall increase in 2002 unit sales in the United States was partially offset by lower
unit sales of Thomas Built-school buses and commercial vehicle chassis manufactured by a Freightliner subsidiary. The 5% increase of revenues in the U.S. due to overall higher unit sales was partially
offset by the appreciation of the euro against the U.S. dollar. Unit sales and revenues in Canada also contributed to the overall increase in revenues and unit sales in the NAFTA region, partially
offset by a drop in unit sales and revenues in Mexico.

75

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The economic crisis in Argentina also affected the Brazilian and other South American markets. Consequently, unit sales in South America dropped 14% to 37,000 from 43,000 in 2001.
Revenues derived from sales in South America fell 25% to [EURO]1.1 billion.

In
2002, our Commercial Vehicles segment reported an operating loss of [EURO]0.3 billion compared to an operating loss of [EURO]0.5 billion in 2001. The 2002 operating
result was burdened by the following impairment and restructuring charges totaling [EURO]0.5 billion: As a result of our long-term product and production strategy, we wrote off
manufacturing and tooling equipment which led to an impairment charge of [EURO]0.2 billion. Due to continued weak demand for commercial vehicles worldwide, we also had to reduce our workforce
in this segment which resulted in charges totaling [EURO]0.2 billion. Last, we recognized restructuring charges of [EURO]0.1 billion in connection with the discontinuation of the wire
harness production at one of our German plants. In 2001, the segment's operating results were burdened by charges of [EURO]0.5 billion recorded by Freightliner for its turnaround plan and
special costs associated with unforeseen market developments.

On
the operational level, weak demand in the truck markets of Western Europe and South America was more than compensated by higher unit sales of Class 8 trucks in the United
States. In addition, lower costs resulting from the restructuring measures initiated at Freightliner in 2001 contributed to the improved result, while the other businesses of the Commercial Vehicles
segment did not match results of the prior year in a generally difficult market.



In 2002, our Services segment reported revenues of [EURO]15.7 billion compared to [EURO]16.9 billion in 2001 which related exclusively to our
financial services business. The appreciation of the euro against the U.S. dollar and a migration of customer preference from operating leases to sales finance transactions were primarily responsible
for this decline.

Activities
of our Services segment in the NAFTA region contributed [EURO]10.0 billion or 64% of total revenues in 2002, a 14% decrease compared to 2001. This decrease was due to
the appreciation of the euro against the U.S. dollar, which resulted in adverse currency translation effects, and a decline in operating leases in favor of sales financing transactions. The shift away
from operating leases to sales financing contracts resulted from prior year's sales promotion practices which included below-market interest rate financing plans.

Revenues
generated in Germany were [EURO]3.5 billion or 22% of total revenues in 2002 compared to [EURO]3.2 billion or 19% of total revenues in 2001. Revenues derived from
service activities in the European Union (excluding Germany) amounted to [EURO]1.6 billion or 10% of total revenues in 2002 compared to [EURO]1.5 billion or 9% in 2001.

In
2002, our Services segment processed new leasing and finance contracts with a total value of [EURO]51.8 billion compared to [EURO]53.7 billion in 2001. Substantially all
the 4% decline compared to 2001 is related to foreign currency translation effects. At December 31, 2002, our Services segment managed a portfolio of finance receivables of
[EURO]109.3 billion, 15% less than the portfolio of [EURO]128.4 billion at December 31, 2001. Excluding foreign currency translation effects, the portfolio volume in 2002 was 2%
below last year's level which resulted from a significant reduction of our portfolio of non-automotive assets.

Operating
profit of our Services segment increased to [EURO]3.1 billion in 2002 from [EURO]0.6 billion in 2001. The 2002 operating profit includes a gain of
[EURO]2.5 billion from the sale of our 49.9% equity interest in T-Systems ITS to Deutsche Telekom. This gain was partially offset by impairment charges of [EURO]0.3 billion
arising from the sale of a significant portion of our capital services portfolio and anticipated losses on expected sales of other portions of our capital services portfolio. This amount includes
actual and expected losses on the recoverability of lease receivables and assets under operating leases. The 2002 operating result also includes a [EURO]0.1 billion charge relating to the
further devaluation of the Argentine peso against the U.S. dollar.

The
2001 operating profit of this segment included a gain of [EURO]0.3 billion from the sale of our remaining 10% equity interest in debitel to Swisscom, a charge of
[EURO]0.1 billion as a result of the devaluation of the

76

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Argentine
peso against the U.S. dollar, and a charge of [EURO]0.2 billion related to the expected loss on the recoverability of certain lease receivables in connection with the intended sale in
2002 of our commercial real estate and asset-backed lending portfolios.

In
2002, favorable refinancing conditions resulting from continued low interest rates in our main markets also had a positive influence on operating profit. Optimized remarketing
activities for vehicles coming off-lease, especially in the United States, and an overall decrease of loss provisions further supported this development. We were able to reduce our loss
provisions because of lower credit risks inherent in the U.S. portfolios of leasing and finance contracts of Chrysler Group and Freightliner vehicles. Higher provisions for credit losses mainly in
Europe and Mexico, which related primarily to our commercial vehicle portfolio, and impairment charges of [EURO]0.3 billion due to declining resale prices of used passenger cars in the United
States partially offset the positive effect of lower credit loss provisions in the United States. The impairment charges relate to the recoverability of the carrying values of our leased vehicles. A
[EURO]0.1 billion loss related to our minority interest in debis Air Finance, an aircraft leasing and finance company, also negatively affected operating profit in 2002.



On December 31, 2003, as part of our ongoing strategy to focus on our core automotive business, we sold MTU Aero Engines GmbH and its subsidiaries (MTU
Aero Engines) to the investment company Kohlberg, Kravis and Roberts & Co. Ltd. (KKR). As required by U.S. GAAP, we are reporting the operating results of MTU Aero Engines as
discontinued operations. We have adjusted our consolidated statements of income (loss) for all periods presented to reflect this presentation.

Revenues
reported in our Other Activities segment originated essentially from the MTU Aero Engines business and are now presented separately as "discontinued operations." Our remaining
revenues from continuing operations originate mainly from our real-estate businesses which consist primarily of property at the Potsdamer Platz in Berlin, Germany. Revenues for 2001
included revenues generated by our Adtranz rail systems business and TEMIC automotive electronics business prior to the dispositions of Adtranz and a 60% controlling interest in Conti Temic
microelectronic. The operating results of this segment include our share in the operating results of our equity method investees EADS and Mitsubishi Motors Corporation. In addition, the segment
includes the operating results of our MTU Aero Engines business, our real-estate activities, corporate research and our holding and finance companies, and it previously included the
operating results of our TEMIC automotive electronics business and our Adtranz rail systems business.

The
transactions involving Adtranz and Conti Temic microelectronic described on page 58 significantly influenced the year-to-year comparability of revenues
and operating profit of the Other Activities segment.

Revenues
in 2002 from continuing operations decreased by [EURO]1.5 billion from [EURO]2.0 billion in 2001 to [EURO]0.5 billion in 2002. Revenues in 2001 include
revenues derived from our TEMIC automotive electronics business through March 31, 2001 and revenues of our Adtranz rail systems business through April 30, 2001, which were
[EURO]1.4 billion in the aggregate.

MTU
Aero Engines recorded revenues of [EURO]2.5 billion in 2001 and [EURO]2.2 billion in 2002. The decrease in revenues of MTU Aero Engines reflected the impact of the
September 11, 2001 terrorist attacks which had a significant adverse effect on the civil aviation industry and, as a consequence, on our MTU Aero Engines business.

In
2002, our Other Activities segment had an operating profit of [EURO]0.9 billion compared to [EURO]1.2 billion in 2001. Our shares in the operating results of EADS, which
performed well despite the general weakness of the civil aviation industry, and Mitsubishi Motors, which improved its operating results through implementation of its restructuring plan, were the main
contributors to 2002 operating profit. Operating profit in 2002 also included a gain of [EURO]0.2 billion resulting from the sale of our 40% interest in Conti Temic microelectronic. Operating
Profit in 2001 included our [EURO]0.9 billion share of a gain arising at EADS in connection with the formation of
Airbus SAS as well as gains of [EURO]0.3 billion and [EURO]0.2 billion from the transactions involving Adtranz and Conti Temic microelectronic, respectively. These gains were partially
offset by our proportionate [EURO]0.4 billion share of Mitsubishi Motors' restructuring charges in 2001.

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LIQUIDITY AND CAPITAL RESOURCES

In 2003, as in 2002 and 2001, our sources of cash came from operations, external borrowings, and sales of finance receivables in securitization transactions. We
used these funds primarily to finance our working capital and capital expenditure requirements and the cash needs of our lease and sales financing business. We typically finance our lease and sales
financing activities with a high proportion of debt.

We
believe the funds available from these and other sources will be sufficient to satisfy our working capital needs and to service our debt in the foreseeable future. We also believe
that our liquidity and capital resources give us adequate flexibility to manage our planned capital spending programs as appropriate to address short-term changes in business conditions.
Our capital needs depend primarily on the size and the timing of our capital expenditures and investments as set forth in our business plans. Subject to developments which we cannot predict or
control, we currently intend to increase our capital expenditures in property, plant and equipment slightly in 2004 compared to 2003.

Liquidity
refers to the liquid financial assets we have available to fund our business operations and pay for near term future obligations. These liquid financial assets consist of cash
and cash equivalents as well as short-term securities. The following table shows our liquid financial assets (in billions of euro) as of the end of each of the last three years:

December 31,2003

2002

2001Cash and cash equivalents

11.0

9.1

10.7Securities

3.3

3.3

3.8Liquidity

14.3

12.4

14.5


---

We hold our cash and cash equivalents primarily in U.S. dollars and euros. As of December 31, 2003, U.S. dollar denominated liquid assets
represented 47% and euro denominated liquid assets represented 46% of total liquid financial assets. Liquid financial assets as a whole were 8.0% of total assets compared to 6.6% at the end of 2002.
For further information on our liquidity, please refer to Note 21 to our Consolidated Financial Statements.

Analysis of Cash Flow Statement

Year ended December 31,2003

2002

2001([EURO] in billions)Net cash provided by operating activities

16.5

18.0

15.5Net cash provided by (used for) investing activities

(16.3
)
(12.9
)
(14.0
)Net cash provided by (used for) financing activities

2.5

(5.5
)
1.9


---



Cash provided by operating activitiesof [EURO]16.5 billion was [EURO]1.5 billion below the prior
year's level. The following factors contributed to this decline:



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Positive
effects from working capital, especially from higher trade liabilities that we incurred as a result of higher production levels at year end, partially offset the negative
effects described above.

Our
(net) contributions to the pension benefit and post-retirement benefit plans of [EURO]1.4 million were approximately the same as in the prior year.

Our
future ability to maintain or increase the amount of cash we generate from our operations depends heavily on future demand for our products in markets worldwide and on our ability to
achieve revenue enhancements, efficiency and cost reduction goals.

Cash used for investing activitiesincreased by [EURO]3.3 billion to [EURO]16.3 billion. The following factors contributed
to this increase:



Cash provided by financing activitiesin 2003 was affected by the (net) increase in financial liabilities, including proceeds from
terminated cross currency hedges of [EURO]0.6 billion, and the distribution of dividends of [EURO]1.5 billion. Overall, we generated cash of [EURO]2.5 billion (2002: cash used of
[EURO]5.5 billion). The change compared with the prior year is mainly due to an increase in the amount of cash used for investing activities with a corresponding increased funding requirement.
The net increase in cash and cash equivalents with an original maturity of three months or less, after taking into account currency translation effects, was [EURO]1.7 billion. Total liquidity,
which also includes long-term investments and securities, increased from [EURO]12.4 billion in 2002 to [EURO]14.3 billion in 2003.

At
December 31, 2003, our financial liabilities were [EURO]75.7 billion of which [EURO]28.3 billion are due within one year. This compares to financial liabilities
of [EURO]79.3 billion at the end of 2002, of which [EURO]30.5 billion were due within one year. The 2003 decrease in financial liabilities resulted primarily from currency translation
effects,
primarily as a result of the depreciation of the U.S. dollar against the euro. The extent to which we are able to use external financing in the future as a means of growing our industrial and
financial services businesses will depend in large part on our credit ratings, which we discuss in more detail below.



Net cash provided by operating activities increased by [EURO]2.5 billion to [EURO]18.0 billion, compared to [EURO]15.5 billion in 2001. The
increase was mainly attributable to Chrysler Group and reflects the improvements in that segment's operating results.

We
used net cash of [EURO]12.9 billion for investing activities in 2002, compared to [EURO]14.0 billion in 2001. Net cash used for our lease and sales financing activities,
net of disposals and repayments, increased to [EURO]11.6 billion in 2002 from [EURO]7.9 billion in 2001. In 2002, we used [EURO]7.1 billion to purchase fixed assets, principally
property, plant and equipment, compared to [EURO]8.9 billion in 2001. We also disposed of several businesses in 2002, which generated [EURO]5.1 billion, net of acquisitions, compared to
[EURO]0.9 billion in 2001. In 2002, our net cash generated from acquisitions and dispositions of businesses originated primarily from the sale of our 49.9% interest in T-Systems
ITS. In 2001, we disposed of our Adtranz rail systems business, a 60%

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controlling
interest in our TEMIC automotive electronics business, and our remaining 10% equity interest in debitel, which were the primary sources of net cash generated from acquisitions and
dispositions of businesses in 2001. For further information on our acquisitions and dispositions, please also refer to Note 4 to our Consolidated Financial Statements.

In
2002, our financing activities used net cash of [EURO]5.5 billion, of which [EURO]1.0 billion related to our dividend payment for 2001. In 2001, our financing activities
provided net cash of [EURO]1.4 billion including a dividend payment of [EURO]2.4 billion. This decrease in net cash provided from financing activities was primarily due to our industrial
business, reflecting improved business results and lower investing activities, as discussed above. The positive effects from our industrial business were partially offset by our lease and sales
financing business, which we typically finance with a high proportion of debt. At December 31, 2002, our financial liabilities were [EURO]79.3 billion of which [EURO]30.5 billion
are due within one year. This compares to [EURO]91.4 billion of financial liabilities at the end of 2001, of which [EURO]34.4 billion were due within one year. The 2002 decrease in
financial liabilities resulted primarily from changes in foreign currency exchange rates, principally the depreciation of the U.S. dollar against the euro, and from net repayments of debt.

Principal Sources of Funding



Our policy is to maintain a high degree of flexibility in our funding and investment activities by using a broad variety of financial instruments. Depending on
our cash needs and market conditions, we issue bonds, notes and commercial paper in various currencies. Therefore, we are exposed to risks associated with changes in interest rates and foreign
currency exchange rates. Moreover, the global nature of our businesses exposes us to risks associated with fluctuations in foreign currency exchange rates and interest rates, which may adversely
affect our businesses, operations and reported financial results and cash flows. We hedge these risks with derivative financial instruments, primarily foreign exchange contracts, currency options,
interest rate swaps and cross-currency interest rate swaps.

In
addition, we use credit facilities in our day-to-day financial management. As part of our liquidity management, we also hold money market investments and
variable-rate or fixed-rate securities. These instruments subject us to market risks that we typically hedge with interest rate swaps, forward rate agreements, caps, floors,
futures and options.

For
information about our market risk exposure, including risks associated with currency exchange rates and interest rates, and our related hedging activities, please refer to "Item 11.
Quantitative and Qualitative Disclosures About Market Risk."

In
accordance with the guidelines established by the Bank for International Settlements, we separate our corporate treasury function organizationally, physically and in its technical
systems from the administrative functions of settlement, financial accounting and controlling.



We use a variety of short- and long-term financial instruments, principally notes/bonds, commercial paper and borrowings from financial institutions.
The following table presents the carrying values of those instruments as of December 31, 2003 and 2002 in billions of euro:

December 31,2003

2002Notes and bonds

47.8

51.9Commercial paper

7.0

9.5Borrowings from financial institutions

14.1

14.1


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As of the end of 2003, the breakdown by currency of our financial liabilities was as follows: 58% in U.S. dollars, 25% in euros, 6% in Canadian
dollars and 2% in British pounds. In most cases, our subsidiaries borrow money in their functional currency. In 2003, our aggregate borrowing rate for outstanding indebtedness was 5.03%, and
approximately 43% of our financial liabilities were at fixed rates. Our total financial liabilities represented 42% of total stockholders' equity and liabilities in 2003 and 2002. Please refer to
Note 26 to our Consolidated Financial Statements for information on the amounts, maturities and interest rates of our financial liabilities.

In
the United States, DaimlerChrysler North America Holding Corporation has a $30.2 billion debt securities shelf registration on file with the U.S. Securities and Exchange
Commission, of which $15.4 billion remained unused as of February 16, 2004.

In
Canada, DaimlerChrysler Canada Finance Inc. has a CAD 5 billion medium term note shelf registration on file with the Canadian securities authorities, of which CAD
2.6 billion remained unused as of February 16, 2004.

In
the Euro-Market we have a $25 billion Euro-Medium Term Note Program, permitting DaimlerChrysler AG and several of its subsidiaries to issue notes and
bonds. Of this program, $6.6 billion remained unused as of February 16, 2004.

On
a stand-alone basis, our financial services entities had financial liabilities of [EURO]63.9 billion in 2003 and [EURO]66.9 billion in 2002. Both amounts include
intercompany financial liabilities with members of our Group. We eliminate these intercompany amounts upon consolidation into our Group financial statements. The liabilities
incurred by our financial services entities closely correspond to the assets they finance, for example, equipment on operating leases and receivables from financial services. These assets totaled
[EURO]74.1 billion in 2003 and [EURO]77.0 billion in 2002. Sales of financial receivables are a significant source of funding for us, principally in the United States. In 2003, net
proceeds from the sales of financial receivables were [EURO]10.9 billion compared to [EURO]11.6 billion in 2002 and [EURO]19.2 billion in 2001. For further information about the
nature of the transactions underlying the sales of receivables and the effects on our consolidated financial statements refer to the discussion under the heading "Off-Balance Sheet
Arrangements" and to Note 33 in our Consolidated Financial Statements.



At December 31, 2003 and 2002, we had short- and long-term credit lines available of [EURO]35.3 billion and [EURO]35.6 billion,
respectively, of which [EURO]21.1 billion and [EURO]21.6 billion were unused as of such dates. In 2003, the weighted average interest rate payable under our lines of credit was 3.5%. Our
credit lines include an $18 billion revolving credit facility with a syndicate of international banks. This facility includes three elements:



A
portion of the $18 billion facility serves as a back-up for commercial paper drawings.

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We also rely on several commercial paper programs. In addition to commercial paper programs denominated in U.S. dollars, Canadian dollars, Mexican pesos and
Australian dollars, we have a multi-currency commercial paper program in the Euro-Market and an asset-backed commercial paper program in the United States.

The
multi-currency commercial paper program and the asset-backed commercial paper program are for maximum amounts of [EURO]10 billion and $4.5 billion, respectively, and,
as of February 16, 2004, the unused portions under these programs were [EURO]8.6 billion and $1.9 billion, respectively.

In
2003, the weighted average interest rate payable under our commercial paper programs was 1.8%.



Standard & Poor's Rating Services (S&P), Moody's Investors Service, Inc. (Moody's), Fitch Ratings Ltd. (Fitch) and Dominion Bond Rating
Service (Dominion) rate our commercial paper (short-term) and our senior unsecured long-term debt (long-term). Our current ratings are as follows:

S&P

Moody's

Fitch

DominionShort-term debt

A-2

P-2

F2

R-1(low)Long-term debt

BBB

A-3

BBB+

A(low)


Debt ratings are an assessment by the rating agencies of the credit risk associated with our company and are based on information provided by us
or other sources that the rating agencies consider reliable. Lower ratings generally result in higher borrowing costs and reduced access to capital markets.

S&P Ratings.On October 21, 2003, S&P lowered its long-term rating for us from BBB+ to BBB, reflecting the agency's
assessment of the persistently difficult market conditions, particularly in the United States, and the expected effects of the difficult environment on the performance of the Chrysler Group. The
outlook for our long-term rating remained negative.

Moody's Ratings.Moody's Investors Service did not change its rating or its rating outlook for us in 2003. At the end of the year, Moody's
maintained its long-term rating of A-3 with a negative outlook and its short-term rating of P-2.

Fitch Ratings.To accomodate investors, we requested Fitch to begin rating our short-term and long-term debt for
the first time in 2003. In July 2003, Fitch assigned a long-term rating of BBB+ with a stable outlook, and a short-term rating of F2. By the end of the year 2003, both
ratings remained unchanged.

Dominion Ratings.During 2003, Dominion Bond Rating Service assigned short-term and long-term ratings for us. The
long-term rating is A (low), the short-term rating is R-1(low).

Debt
ratings are not a recommendation to buy, sell or hold securities. Ratings may be subject to revision or withdrawal by the rating agencies at any time. As rating agencies may have
different criteria in evaluating the risks associated with a company, you should evaluate each rating independently of other ratings.



We may issue ordinary shares of our company or bonds convertible into our ordinary shares as another potential source of funding. Our board of management may
issue up to [EURO]500 million, in nominal amount, of new ordinary shares for cash until April 8, 2008, if our supervisory board approves the issue. Additionally, the board of management
may issue up to [EURO]15 billion, in nominal amount, of convertible bonds and notes with attached warrants, with a term of up to 20 years, until April 18, 2005. The convertible
bonds and notes with attached warrants may grant to the holders or creditors up to [EURO]300 million, in nominal amount of capital stock, in option or conversion rights for new shares in our
company.

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Contractual obligations and commercial commitments

The table below presents our on- and off-balance sheet contractual obligations as of December 31, 2003:

| |                                     | Payments due by period
| | ----------------------------------- | ----------------------
|
|
| | Long-Term Debt                      |                       
| | Capital Lease Obligations           |                       
| | Operating Leases                    |                       
| | Purchase and Investment Obligations |                       
| | Other Long-Term Obligations         |                       
| |                                     |                       
| | Total Contractual Obligations       |                       
| |                                     |                       

---

Contractual obligations are obligations to make payments or transfer assets under existing contracts. "Long-Term Debt" is comprised of
future principal and interest payments that we need to make to settle our financial liabilities with original maturities of more than one year. "Capital Lease Obligations" encompass the total minimum
future lease payments for capital leases. "Operating Leases" represent the total minimum future lease payments for operating leases. "Purchase and Investment Obligations" are obligations arising from
future purchases for, among other things, production materials or for future investments in property, plant and equipment. The line "Other Long-Term Obligations" contains all our other
contractual cash obligations that are not included in one of the other categories and do not include accrued liabilities.

Benefit Plan Obligations and Costs

The obligations and expenses recognized in our Consolidated Financial Statements for our employee benefit plans are not necessarily indicative of our projected
obligations and cash funding requirements. The reason is that we normally experience actual results that differ from the assumptions used in the actuarial determination of our benefit plan obligations
and costs and then under U.S. GAAP we recognize the accumulated differences
in our consolidated financial statements through amortization over future periods when certain conditions are met. Please refer to the discussion under the heading "Critical Accounting
Policies  Pension and Other Postretirement Benefits" in "Item 5. Operating and Financial Review and Prospects" and to Note 25a to our Consolidated Financial Statements for
further information regarding pension benefit and other postretirement benefit obligations, the significant assumptions used, and the sensitivity of those assumptions to our Consolidated Financial
Statements.



Plan assets, which are primarily held in trusts and invested to provide for current and future pension benefits, partially offset our projected pension benefit
obligations. Plan assets consist of investments in equity securities, debt securities, cash, and investments in real estate.

The
funded status of our pension benefit obligations expresses the extent to which plan assets are available to satisfy our obligations. At December 31, 2003, our pension plans
had an underfunded status of [EURO]5.8 billion compared to an underfunded status of [EURO]8.4 billion at December 31, 2002. During 2003, we contributed [EURO]2.1 billion to
our pension benefit plans, thereof [EURO]1.4 billion in cash and [EURO]0.7 billion from the transfer of postretirement plan assets to the pension plan trust. The improvement of the
funded status of our pension benefit plans in 2003 is mainly attributable to the favorable performance of the equity markets in 2003, the total contribution of [EURO]2.1 billion in 2003, and
the appreciation of the euro against selected world currencies, primarily the U.S. dollar. We realized higher returns on plan assets compared to assumptions used

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for
expected returns on our plan assets. Actual rates of return for German and non-German plans were positive at 14.6% and 23.0%, respectively. The increase in plan assets offset the
unfavorable impact on our funded status caused by the reduction of the discount rates assumed for all significant plans in 2003 as well as the additional obligations that resulted from the
negotiations with the United Automobile, Aerospace, and Agricultural Implement Workers of America (UAW) in 2003.

Specific
U.S. GAAP accounting rules that are applicable due to the underfunded status of our accumulated pension benefit obligations required us to recognize an additional minimum
pension liability. The initial recognition and subsequent changes in the additional pension minimum liability do not effect our consolidated statements of income (loss). The improvement in the
underfunded status of our accumulated pension benefit obligations resulted in a [EURO]0.7 billion pretax reduction of our minimum pension liability in 2003, which is
recognized in other comprehensive loss. Due primarily to total contributions of [EURO]2.1 billion to our pension plans in 2003 and due to the favorable return on plan assets in 2003, we were
able to reduce our total accrued pension liability from [EURO]7.4 billion at December 31, 2002, to [EURO]5.0 billion at December 31, 2003. The sum of our plan assets of
[EURO]26.3 billion and our pension accruals of [EURO]5.0 billion is [EURO]31.3 billion, while our total pension benefit obligations amount to [EURO]32.1 billion as of
December 31, 2003.



We do not expect to increase cash contributions to our pension plans substantially in the near term. If actual returns on plan assets are substantially below
expected return assumptions over an extended period of time, however, this could adversely affect our liquidity by requiring additional pension funding.



We estimate that our total pension benefit expense in 2004 will approximate our 2003 expense of
[EURO]0.8 billions.



Plan assets invested to provide current and future plan benefits partially offset accumulated other post-retirement benefit obligations. Plan assets
mainly consist of investments in equity securities and fixed income securities.

The
funded status of our other post-retirement benefit obligations expresses the extent to which plan assets are available to satisfy our obligations. At December 31,
2003, our other post-retirement benefit obligations had an underfunded status of [EURO]13.4 billion compared to an underfunded status of [EURO]13.7 billion at
December 31, 2002. After deducting the accrued liabilities recognized on our consolidated balance sheets for our other post-retirement benefit obligations at December 31,
2003 and 2002, of [EURO]8.2 billion and [EURO]8.2 billion, respectively, we had underfunded other
post-retirement benefit obligations of [EURO]5.2 billion and [EURO]5.5 billion at December 31, 2003 and 2002, respectively, which were not recognized. The improvement
of this underfunded position is mainly attributable to the appreciation of the euro against selected world currencies, primarily the U.S. dollar, and the strong performance of the equity markets in
2003, which resulted in a positive actual rate of return on plan assets of 22%. These effects offset the transfer of [EURO]0.7 billion from the post-retirement plan assets to the
pension plan assets as well as the unfavorable impact on our funded status caused by the decrease in the discount rates assumed.



We are not required by law or labor agreements to make contributions to our other post-retirement benefit plans.



We estimate that our total other post-retirement benefit expenses will increase by [EURO]0.1 billion in 2004. This is the result of lower
discount rates used and amortization of higher unrecognized net losses in 2004.

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OFF-BALANCE SHEET ARRANGEMENTS

We utilize certain off-balance sheet arrangements in the ordinary course of business. Our off-balance sheet arrangements are contractual
arrangements with unconsolidated third parties under which we have or may have obligations arising from:



Obligations under guarantees

Obligations arising from guarantees pertain to:



Suppliers and service providers.We sometimes guarantee specific obligations of suppliers and other parties that provide
products or services or that lease property plant and equipment to us. Some suppliers and service providers have financed through loans or leases certain property plant and equipment that they use to
provide vehicle components and services to us. We have guaranteed to third parties some of the obligations under those leases or loans in the event the supplier is not able to meet its requirements
under those arrangements. We have determined that our maximum exposure to loss (i.e., our maximum obligation) as a result of these guarantees is approximately [EURO]0.4 billion as of
December 31, 2003. Purchases from and corresponding cash payments made to these suppliers and service providers in 2003 were not material on a Group or segment basis.

Obligations of associated companies.In 2002, a consortium consisting of our subsidiary DaimlerChrysler Services AG, Deutsche
Telekom AG and Compagnie Financiere et Industrielle des Autoroutes (Cofiroute) contracted with the Federal Republic of Germany to develop, install and operate a system for electronic collection of
tolls from all commercial vehicles over 12t GVW using German highways. Toll Collect GmbH, a German limited liability company in which DaimlerChrysler Services and Deutsche Telekom each hold a 45%
interest and Cofiroute holds the remaining 10%, is the principal builder and prospective operator of the system. We account for our 45% ownership interest in Toll Collect GmbH using the equity method
of accounting. Once the system has been successfully installed, Toll Collect GmbH will become the primary contracting party under the operating agreement. The original deadline for completion of the
system was August 31, 2003, but technical difficulties have delayed completion.

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In
the operating agreement, each of the consortium members (including DaimlerChrysler Services AG) and certain of their affiliates have provided guarantees relating to the completion and
successful operation of the toll collection system. These guarantees which are subject to specific triggering events, include the following:



The
operating agreement also includes the following commitments:



The
Federal Republic of Germany and the Toll Collect consortium have the right to terminate the operating agreement if the terminating party can show that the other party has breached
specified substantial obligations under the agreement (which may include a failure to meet deadlines or other requirements or a neglect of duties of cooperation) and has failed to cure the breach
within a specified time period.

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On
January 27, 2004, the Toll Collect consortium presented a proposal to the Federal Republic of Germany, calling for a two-step completion of the toll collection system. Following
several days of discussions among the consortium members and the German government in an effort to reach an agreement regarding the completion and future risk allocation in connection with the
project, on February 17, 2004, the consortium members received a letter from the German Secretary of Transportation calling the proposal from the consortium members unacceptable. The Secretary of
Transportation also informed the consortium that he had instructed the appropriate government agency to submit a contractual notification of termination to the consortium partners, that the government
would claim all applicable damages and penalties under the operating agreement, including claims under guarantees, and that these claims should be submitted to arbitration in short order. In his
letter, the Secretary of Transportation also stated, however, that he sees a possibility of avoiding termination of the operating agreement if the consortium partners agree to certain demands of the
Federal Republic of Germany, including:



We
have filed an English translation of the letter from the German Secretary of Transportation as an exhibit to this annual report.

If
the consortium is able to reach a compromise with the German government, it may entail additional financial risk for the consortium members. If the discussions fail, the Federal
Republic of Germany may attempt to terminate the operating agreement in accordance with its terms, which may result in material losses (impairment charges, costs and expenses) to the consortium
partners the amount of which cannot be reliably estimated at the present time.

You
can find additional information about Toll Collect under the heading "Legal Proceedings" in "Item 8. Financial Information," and in Notes 3 and 31 to our Consolidated Financial
Statements.

We
have also guaranteed the indebtedness of other non-consolidated affiliated companies, joint venture companies, and certain non-incorporated companies,
partnerships and project groups. We provided these guarantees to assist these companies in securing financing. Our maximum total obligations under these guarantees at December 31, 2003, as well
as the payments under these guarantees in 2003, were not material.

Guarantees to support sales efforts.We sometimes issue tradeback, leaseback and buyback guarantees to customers to support
the sales of our vehicles.

Tradeback
guarantees have different terms and durations, but are typically issued over a period of three years. To encourage customers to purchase from us in the future, we sometimes
agree to repurchase the used vehicles from customers for predetermined values as long as the customers trade in their used vehicles for new ones. Our repurchase obligation is subject to various
conditions, including limitations on mileage and age of the vehicle.

In
other instances, we have provided to customers buy-back guarantees under which we guaranteed the residual values of vehicles sold after a specific period of time. The
customers are entitled to return their vehicles back to us for the guaranteed value. We also provided these guarantees to certain leasing companies who, in turn, provided financing and leasing
arrangements to our customers. Under these arrangements, we guaranteed the residual values of vehicles coming off-lease or that were repossessed in upon customer default on their financing
and leasing arrangements.

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Our
maximum exposure to loss pertaining to those guarantees was [EURO]2.2 billion at December 31, 2003, of which [EURO]0.7 billion is already accrued in our
consolidated financial statements as of that date. The extent to which we use such guarantees to promote our sales efforts depends to a large degree on the prevailing market environment. As we expect
market conditions to improve slightly in the years to come, particularly in the commercial vehicle market in the United States to which a substantial amount of those guarantees relate, we do not
anticipate significant increases in the amount of such guarantees in the near term.

Guarantees incurred in divestitures.As explained in more detail in the section "Business Summary and Developments" in "Item
4. Information on the Company," we have disposed of several investments in non-core assets and businesses over the last several years. In connection with these divestitures, we provided
guarantees relating to, among other things, the adequacy of corporate records and tax returns, continuation of supplier contracts, and contingent liabilities with respect to environmental protection
issues. In addition, we retained certain obligations of the divested companies that the buyer did not assume. The retained obligations relate primarily to sales and services transactions and contracts
of these businesses that expire when the related transactions are completed. The maximum obligation under these guarantees as of December 31, 2003, was approximately [EURO]1.1 billion.
Accrued liabilities recognized on our consolidated balance sheet related to those guarantees amounted to [EURO]0.4 billion as of December 31, 2003.

Other guarantees.We have granted a number of other guarantees. Most notably, we have guaranteed the obligations of our
employees under our corporate credit card program for corporate travel expenses with Deutsche Bank AG in the event the employees default on their obligation to Deutsche Bank AG. In such event, we seek
reimbursement from the defaulting employees by withholding compensation payments until the defaulted amount has been completely recovered. This guarantee amounted to [EURO]0.7 billion as of
December 31, 2003. We have never incurred nor do we expect to incur any significant losses under this guarantee arrangement.

We
do not expect the remaining guarantees to have a material effect, individually or in the aggregate, on our consolidated financial condition and results of operations. For additional
information on how we account for guarantees, please refer to Notes 1 and 31 to our Consolidated Financial Statements.

Sale of sales financing and finance lease receivables

Our Financial Services segment enters into transactions that provide customers with the opportunity to finance the purchase of passenger cars and commercial
vehicles over an extended period of time through sales financing and lease transactions. Based on market conditions and our current liquidity needs, we combine portfolios of sales financing and
finance lease receivables and use several methods of selling interests in those receivables to third parties. In connection with these types of transactions, we receive cash in exchange for the
interests in the receivables sold and retain subordinated interests and residual cash flows. These transactions provide us with necessary flexibility in managing the extent to which we offer financing
to customers and reduce the need for us to issue long-term debt. To a minor extent we also sell receivables from other segments.

We
utilize qualifying special purpose entities (QSPE) to securitize (monetize) wholesale and retail automotive receivables. Public retail and public wholesale transactions typically
involve the sale of a portfolio of receivables through trusts that issue securities to the public. These trusts meet the criteria in SFAS 140 for QSPEs and, therefore, such securitizations are
treated as sales with de-recognition of the transferred receivables from our balance sheet. In most of these transactions, we receive a servicing fee in exchange for collecting and posting
all payments, responding to inquiries of customers, investigating delinquencies, performing necessary and reasonable collection efforts, accounting for collections, and furnishing the reports and
other information required under the respective servicing agreements. We retain a subordinated beneficial interest in the receivables sold, which is designed to absorb substantially all of the credit,
prepayment and

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interest-rate
risk of the receivables transferred. Our risk of loss from the beneficial interests is limited to the amount of the carrying value of our retained interests, which are
classified as "Other receivables" in our Consolidated Financial Statements.

The
outstanding balance of receivables we sold to QSPEs in 2003 and the corresponding retained interest balance as of December 31, 2003, are approximately
[EURO]17.8 billion and [EURO]2.4 billion, respectively.

We
also sell automotive receivables to multi-seller and multi-collateralized bank conduits, which are considered variable interest entities as defined in FIN 46R, in the ordinary course
of business. A bank conduit generally receives substantially all of its funding from issuing asset-backed securities that are cross collateralized by the assets held by the entity. We generally remain
as servicer and also retain residual beneficial interests in the receivables sold, which are designed to absorb substantially all of the credit, prepayment, and interest-rate risk of the
receivables transferred to the conduits. The outstanding balance of receivables sold to conduits and the corresponding retained interest balance as of December 31, 2003, are approximately
[EURO]4.4 billion and [EURO]0.8 billion. For further information regarding the adoption of FIN 46R with respect to those bank conduits please see Note 2 to the Consolidated
Financial Statements.

During
the year ended December 31, 2003, we sold [EURO]9.6 billion of retail receivables. Under our revolving wholesale credit facilities, we reinvested (sold) wholesale
receivables of [EURO]46.7 billion in wholesale securitizations for which we received proceeds of [EURO]46.6 billion in 2003. As a result of the receivables sold to QSPEs and bank
conduits, we received net proceeds of [EURO]10.0 billion in cash for new securitizations and [EURO]0.7 billion in cash on retained interest in securitized receivables in 2003. In
addition, we received servicing fees of [EURO]0.2 billion and we recognized gains of [EURO]0.4 billion in 2003. Impairment charges on the outstanding balance of retained interest in sold
receivables were not material in 2003.

Please
refer to "Critical Accounting Policies  Collectibility of Sales Financing and Finance Lease Receivables  Retained Interests in Sold
Receivables" and to Note 33 to our Consolidated Financial Statements for further information on how we account for these transactions.

Research and development activities

We cooperate with other companies in a number of research and development projects, including the research and development of fuel cells by Ballard Power
Systems Inc. and Ballard AG. We hold variable interests through equity investments in both of those companies. Additionally, we have an agreement with McLaren Cars Ltd., a wholly owned
subsidiary of TAG McLaren Holdings Ltd., for the design and production of our new high performance sports car, the SLR. We hold variable interests in TAG McLaren Holdings Ltd. through a
40% equity investment. Total payments for these off-balance sheet research and development arrangements with Ballard AG and TAG McLaren Holdings Ltd. were not material in 2003. We
account for our equity interests in Ballard Power Systems, Inc., Ballard AG and TAG McLaren Holdings Ltd. using the equity method of accounting. Therefore, our share in the equity of
those companies is included in our financial statements. For additional information on research and technology, please refer to "Research and Development."

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RESEARCH AND DEVELOPMENT

Strategic Approach and Organization

To be competitive in our principal markets, and to secure technological leadership, it is essential for us to develop innovative products and production systems
and to shorten lead times in research and development.
Innovation is an important element of our overall corporate strategy, and our corporate research function plays a significant role in meeting this strategic goal together with our business units. Our
corporate research function:



On
the corporate level, we conduct our research work in 14 laboratories which are assigned to three primary research areas:



Most
of these research facilities are located in Germany, but we also maintain several research centers in North America and Asia. These include a research and technology center in Palo
Alto, California, a vehicle systems technology center in Portland, Oregon, and a research center for information and communication technology in Bangalore, India. We also have a joint venture with the
Shanghai Institute of Metallurgy in Shanghai, China, in the area of automotive electronics. In addition, we participate actively in the international exchange of new ideas and concepts through
cooperations with world-renowned research institutes and exchange programs for scientists and employees.

Future Challenges

A key challenge for sustainable mobility will be the further reduction of both conventional fossil oil based fuel consumption and exhaust emissions, especially
carbon dioxide. We follow a three-step strategy to meet this challenge: first, further improvement of conventional combustion engine technology; second, development of hybrids as a
bridging technology; and third, commercial development of fuel cell propulsion. In particular, maintaining and securing our position among the leading companies in the area of alternative propulsion
technologies is a cornerstone of our corporate strategy.

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Improvement of Conventional Combustion Engine Technology.We believe that optimizing conventional propulsion systems using
internal combustion engines and developing corresponding innovative fuels  from clean sulfur-free fuels and synthetic fuels to new biogenous or renewable
fuels  will be the two key elements in reducing emissions and fuel consumption in the short and medium term. In 2003 we began testing the first biogenous diesel fuel
world-wide.

Hybrid Vehicles.Hybrid technology combines a conventional internal combustion engine with an electric propulsion system.
Hybrid vehicles use established technologies and fuels while permitting a significant reduction in fuel consumption and emissions.

Over
the last twenty years, we have built several hybrid concept vehicles using different vehicle platforms. These range from smaller size vehicles like the Mercedes-Benz
A-Class and the
smart up to sport utility vehicles like the Dodge Durango, mid-size cars like the Chrysler Sebring and our newest research vehicle, the F 500 Mind, with a diesel hybrid which we introduced
in October 2003.

Since
the more complex technology of hybrid vehicles results in higher costs and consequently higher prices to the consumer, automobile manufacturers have thus far only been able to
market these vehicles successfully in the context of special user applications. For example, our Dodge Ram Contractor Special can function as a mobile hybrid and also as a stationary generator
supplying electric power. Reducing the production costs of these vehicles is the primary focus of our current development efforts in this area. We regard hybrid vehicles as an intermediate step, as a
bridge between the combustion engine and the fuel cell.

Fuel Cell Vehicles.Fuel cell propulsion systems can operate on a range of alternative fuels, including hydrogen or methanol.
Since fuel cells operate with a significantly higher degree of efficiency compared to internal combustion engines, fuel cells have enormous potential when it comes to reducing carbon dioxide
emissions. As a fundamentally new propulsion concept, however, the fuel cell only marks the beginning of a new long-term technological development phase. The wide use of fuel cells in
automotive transportation would also require a new fuel infrastructure for the supply of hydrogen or methanol. As a consequence, large-scale production of fuel cell powered vehicles may not occur
before the next decade.

To
support further our research activities in the area of fuel cells we hold a 16.97% equity interest in Ballard Power Systems, Inc. of Burnaby, Canada, and a 49.9% interest in
Ballard Power AG of Kirchheim, Germany. Ballard is one of a small group of companies leading the research, development, manufacture and sale of fuel cells and fuel cell systems with PEM technology
(Proton Exchange Membrane, also called Polymer Electrolyte Membrane) for various applications.

We
have been testing various concepts for fuel cell vehicles since 1994. We developed as many as 20 different vehicle prototypes with fuel cell drives. These range from research cars
such as the NECAR 1 to NECAR 5, the Mercedes-Benz A-Class and the Jeep® Commander to a Mercedes-Benz van and the NeBus bus. In October 2002, we
presented the first fuel cell powered vehicles for fleet use. In 2003, we delivered 30 Citaro city buses to local public transport operators in ten European cities. The buses are operating in regular
line service under different climatic and topographical conditions and familiarize, on a day-to-day basis, thousands of passengers in Europe with this innovative and clean
propulsion system. With an additional 60 Mercedes-Benz A-Class "F-Cell" cars which we began providing to select customers in 2003, we will have more than 100 fuel
cell powered vehicles under evaluation in everyday conditions in different parts of the world by the end of 2004.

With
these steps, we will have completed the concept stage of fuel cell powered vehicles and will have achieved another milestone on the way to market maturity of this revolutionary
propulsion technology. Further development will now largely depend on the practical experience gained through day-to-day operation of these fleet vehicles.

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Funding

As of December 31, 2003, our corporate research function had approximately 2,900 employees compared to 2,600 in 2002 and 2,700 in 2001. Together with the
development departments of our business units, we employ a total of 26,700 scientists, engineers and technicians worldwide in our research, development and testing activities compared to 27,500 in
2002 and 28,100 in 2001.

In
2003, we spent a total of [EURO]5.6 billion on research and development, including research activities at the corporate level (2002: [EURO]5.9 billion; 2001:
[EURO]5.8 billion). Research and development costs reached 4.1% of our total revenues in 2003.

The
following table shows the research and development expenditures funded by us:

Year Ended December 31,20031

20021,2

20011,2([EURO] in millions)Research and development

5,571

5,942

5,848


---

OUTLOOK

Economic and market conditions.We believe the prospects for growth of the world economy have gradually improved since the
middle of 2003, with the main impetus coming from North America and the emerging markets. We expect that the U.S. economy, in particular, will experience strong growth in 2004. We also have a more
positive outlook for the economies of Western Europe, but due to the slow recovery of demand in Germany, we believe growth is likely to remain modest at first and is unlikely to accelerate before
2005. In Japan, our mid-term expectations are subdued despite positive developments there in 2003.

Now
that South America seems to have overcome its economic crisis and since Asia and Eastern Europe are developing positively, we expect emerging markets begin providing a useful
stimulus in 2004.

Overall,
we expect the world economy to expand by just over 3% in 2004 and 2005. We assume that the euro will continue to appreciate, albeit slightly, against major currencies compared
with average exchange rates in 2003.

Moderate rise in global demand for automobiles.We expect favorable economic developments to lead to more buoyant demand for
passenger cars. Although we expect the tough competitive situation in North America to continue throughout 2004, the market for passenger cars and light trucks is expected to expand slightly. In
Western Europe and Japan, we believe market growth will commence some time during 2004 in parallel with overall economic developments but will not be as strong as in most other regions of the world.

In
the field of commercial vehicles, the major markets of North America and Western Europe appear to have bottomed out. The expected economic revival with growing capital investment
activity should trigger a gradual
increase in commercial vehicle unit sales in these markets. However, in Japan the purchases brought forward in the year 2003, due to new emission regulations, may reduce commercial vehicle growth
prospects in that country through 2004.

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In the next few years, we expect expansion in global demand for both passenger cars and commercial vehicles will primarily take place in the emerging markets of Asia, South America and
Eastern Europe, due to dynamic growth in purchasing power and rising need for mobility in these regions. International competition will be further exacerbated by the limited prospects for expansion of
the large automobile markets of North America, Western Europe and Japan in combination with shorter product lifecycles and high production capacity worldwide. Additional factors are stricter
environmental and safety regulations, the fulfillment of which will increase costs for all manufacturers. Against this background, such advantages as the ability to set oneself apart from the
competition by means of innovation and strong brands, presence in the growth markets of Asia, and the opportunity to exploit economies of scale will continue to gain importance.



Further growth for Mercedes Car Group.In the next few years, Mercedes Car Group's second model offensive is expected to not
only renew its product range, but actually broaden it substantially. Our goal is to significantly increase unit sales, revenues and operating profit by 2006, and to strengthen further the market
position of our Mercedes-Benz and smart brands. We intend to achieve these targets by launching numerous new models that we plan to launch in the years 2004 through 2006. The new
Mercedes-Benz models include a new SLK roadster, new A-Class models, a new four-door CLS coupe, a new M-Class, a Grand Sports Tourer and the new
S-Class. The smart product range will be extended in April 2004 with the new four-seater smart forfour, and in 2006 with the mini SUV smart formore to be produced in
Brazil. In addition, Mercedes Car Group will increase its drive to leverage the market potential offered by Asia in the future. We plan to selectively expand our activities in China and to continue
strengthening our sales organizations in Asian markets.

Chrysler Group to launch numerous new products.Chrysler Group expects the U.S. market for passenger cars and light trucks to
continue to be extremely competitive. In addition to further efficiency improvements, Chrysler Group's strategic focus will therefore increasingly be on achieving a sustained improvement in
competitiveness through attractive, innovative new products with more appeal than their rivals. Nine new vehicle models are scheduled to be launched in 2004 and a total of 25 in 2004 through 2006.
With these new vehicles, Chrysler Group expects to rank alongside the best in the world in terms of product quality and the efficiency of production processes, while setting itself apart from the
competition with its product designs and attractive value. This strategy is expected to result in increasing earnings contributions starting in 2004, despite higher expenditures for the introduction
of new products.

Further earnings improvement for Commercial Vehicles.The Commercial Vehicle segment intends to achieve cost advantages over
the competition by continuing its successful efficiency improvement programs and utilizing more consistently than in the past the economies of scale arising from its position as the world's largest
manufacturer of commercial vehicles. The Commercial Vehicles segment intends to strengthen its market position in Asia, especially in China, in collaboration with our Asian partners. In addition to
this strategic initiative, beginning in 2004 the segment will push forward its product offensive with new models, new components and pioneering technologies to raise safety and environmental
standards. Overall, we believe the segment is well prepared to strengthen its market position worldwide in the coming years while continuously improving its profitability.

Increasing sales support from Financial Services.The Services segment will continue to focus on automotive financial
services. Unit sales of the Group's brands will be promoted while maintaining the profitability of the financial services business. In cooperation with the sales organizations of the automotive
brands, additional tailored financial services offers will be created which will be adapted to each brand's specific requirements and markets. Furthermore, we are preparing to expand our services
activities in Asia.

Other Activities  Mitsubishi Motors Corporation.Business developments at Mitsubishi Motors in its 2003/04
financial year are overshadowed by its continuing losses. This necessitates a repeated thorough revision of the existing mid-term planning and restructuring activities at Mitsubishi
Motors, which should lead

93

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to
sustained improvement in its operating result and balance sheet structure. It is unlikely, however, that Mitsubishi Motors will achieve a significant improvement in profitability before it launches
new models in 2005 and 2006. We account for our minority interests in Mitsubishi Motors using the equity method of accounting and we report our share of the operating results of Mitsubishi Motors as
part of the operating results of our Other Activities segment.

Revenue prospects.Given our expectations of a generally more favorable market environment, on a comparable basis we expect
our 2004 revenues to be somewhat higher than in 2003. The expected appreciation of the euro against the U.S. dollar compared with the average exchange rate in 2003 is expected to lead to negative
currency translations effects in 2004.

Earnings prospects.We expect that markets will remain intensely competitive in 2004. Compared to the operating results
achieved in 2003, adjusted to exclude the restructuring charges at Chrysler Group and the gain from the sale of MTU Aero Engines, and based on the expectations of our business segments and our equity
investees EADS and Mitsubishi Motors, we are striving to achieve a slight increase in operating profit in 2004. We anticipate significant improvements in earnings in the years 2005 and 2006 when the
full effects are felt of both Mercedes Car Group's second model offensive and Chrysler Group's new products. In total, we expect to launch about 50 new vehicle models during the period from 2004
through 2006. In addition, we will continue to concentrate on actions to enhance efficiency, reduce costs and improve competitiveness in all our business segments. The intensified networking of our
worldwide activities, the knowledge transfer within our
Group and above all the cross-divisional projects initiated by our Executive Automotive Committee (EAC) are all expected to contribute towards higher earnings in the coming years. However, a critical
condition for the achievement of the targeted increase in earnings is a stable economic and political environment as well as the upturn in the global demand for automobiles that we expect for the
years 2004 through 2006.

As
a result of the anticipated improvement in market conditions and the introduction of numerous new and high-value models, we assume that our revenues will rise
significantly in 2005 and 2006. We forecast positive contributions to be made by all of our segments. We expect to record the highest growth rates in the emerging markets of Asia.



[EURO]38 billion to secure the future.In the period 2004 through 2006, we expect to invest about
[EURO]38 billion in property, plant and equipment, and research and development. Cross-divisional collaboration within our Group and with our Asian partners and the resulting economies of scale
are expected to enable us to employ these funds even more efficiently than in the past. A large part of the expenditure will be for the development and preparation of new vehicles to continue Mercedes
Car Group's second model offensive and for Chrysler Group's new models. We also intend to spend significant amounts to modernize our manufacturing facilities and to develop new technologies to enhance
the safety, environmental compatibility and economics of road transport.

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Item 6. Directors, Senior Management and Employees.

In accordance with the German Stock Corporation Act (Aktiengesetz), we have a two-tier board structure
with a supervisory board (Aufsichtsrat) and a board of management (Vorstand). The two boards are
separate and no individual may simultaneously be a member of both boards.

The
principal function of the supervisory board is to supervise our board of management. The supervisory board is also responsible for appointing and removing members of the board of
management. The supervisory
board may not make management decisions. In accordance with German Stock Corporation Act, however, our supervisory board has determined that several matters not in the ordinary course of business that
are of fundamental importance require the approval of the supervisory board.

The
board of management, which acts under the principle of collective responsibility, manages our day-to-day business in accordance with the German Stock
Corporation Act and our memorandum and articles of association. The board of management is authorized to represent us (DaimlerChrysler AG) and to enter into binding agreements with third parties on
our behalf.

SUPERVISORY BOARD

As required by the German Stock Corporation Act (Aktiengesetz), the German Co-determination Law
(Mitbestimmungsgesetz) and our articles of association, our supervisory board consists of twenty members. Ten members are elected by our shareholders at
the annual general meeting of shareholders and ten members are elected by our employees. Any member of our supervisory board elected by our shareholders may be removed by a majority of the votes cast
at a general meeting of shareholders. Any member of our supervisory board elected by our employees may be removed by three-quarters of the votes cast by the relevant class of employees.

The
supervisory board elects a chairman and a deputy chairman from among its members. Unless the shareholder and employee representatives on the board agree on candidates for chairman
and deputy chairman, the representatives of the shareholders have the right to elect the chairman and the representatives of the employees have the right to elect the deputy chairman.

At
least half of the total number of members of the supervisory board, in our case at least ten, must be present or participate in decision-making to constitute a quorum. Unless
otherwise provided for by law, the supervisory board passes resolutions by a simple majority of the votes cast. In the event of a deadlock, it has to hold another vote and, in the case of a second
deadlock, the chairman of the supervisory board casts the deciding vote. A member of the supervisory board is under a duty to disclose any material interest the member has in proposals, arrangements
or contracts between us and third parties. Under German corporate law, the maximum permissible term of office for members of a supervisory board is five years. If appointed for the maximum permissible
term, a member's term expires at the end of the annual general shareholders' meeting after the fourth fiscal year following the year in which the supervisory board member was elected. Supervisory
board members may be re-elected and are not subject to a compulsory retirement age. Our rules of procedure for the supervisory board, however, provide that future candidates under
consideration for membership on our supervisory board should generally not reach the age of 70 before their prospective term of office would expire. Our articles of association establish the
compensation of our supervisory board members.

The
current employee representatives of the supervisory board were elected in March 2003. The following individuals were elected members of the supervisory board:



95

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Prof.
Dr. Heinrich Flegel, Dr. Thomas Klebe and Jürgen Langer are first time members of our supervisory board. Three previous members, Manfred
Göbels, Peter Schönfelder and Bernhard Wurl, chose not to be nominated for reelection. The election of all employee representatives became effective after the end of the
2003 annual meeting. The term of all newly elected employee representatives will expire at the Annual Meeting 2008. Effective June 6, 2003, G. Richard Thoman resigned from his position as a
shareholder representative on the supervisory board. The district court in Stuttgart appointed William A. Owens as his successor. The current term of all shareholder representatives on our supervisory
board will expire at the annual meeting to be held in April 2004.

The
following table shows the name, age (as of February 19, 2004) and principal occupation of each current member of our supervisory board, the year in which he was first elected
to the board and whether he is a member of the supervisory or other non-executive board of any other company. Employee representatives are identified by an asterisk.

|Hilmar Kopper,
Chairman       |  | Age:
First elected:                           |  | 68
1998 (Daimler-Benz AG: 1990)                                                                                                                                                    
|----------------------------- |  | --------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                              |  | Principal Occupation:                         |  | Chairman of the Supervisory Board of DaimlerChrysler AG                                                                                                                            
|                              |  | Supervisory Board Memberships/ Directorships: |  | Xerox Corporation; Unilever N.V.                                                                                                                                                   
|Erich Klemm*,
Deputy Chairman |  | Age:
First elected:                           |  | 49
1998 (Daimler-Benz AG: 1988)                                                                                                                                                    
|                              |  | Principal Occupation:                         |  | Chairman of the Corporate Works Council, DaimlerChrysler AG and DaimlerChrysler Group                                                                                              
|Prof. Dr. Heinrich Flegel*    |  | Age:
First elected:                           |  | 55
2003                                                                                                                                                                            
|                              |  | Principal Occupation:                         |  | Director Research Manufacturing Engineering, DaimlerChrysler AG; Chairman of the Management Representative Committee, DaimlerChrysler Group                                        
|Nate Gooden*                  |  | Age:                                          |  | 65                                                                                                                                                                                 
|                              |  | First elected:                                |  | 2002                                                                                                                                                                               
|                              |  | Principal Occupation:                         |  | Vice President of the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW)                                                        
|Earl G. Graves                |  | Age:                                          |  | 69                                                                                                                                                                                 
|                              |  | First elected:                                |  | 2001 (Chrysler Corporation: 1990 - 1998)                                                                                                                                           
|                              |  | Principal Occupation:                         |  | Chairman and Chief Executive Officer of Earl G. Graves, Ltd. (Publisher, Black Enterprise magazine); Managing Director, Black Enterprise/Greenwich Street Corporate Growth Partners
|                              |  | Supervisory Board Memberships/ Directorships: |  | Aetna Life and Casualty Company; AMR Corporation (American Airlines); Federated Department Stores, Inc.; Rohm & Haas Corporation                                                   
|Prof. Victor Halberstadt      |  | Age:                                          |  | 64                                                                                                                                                                                 
|                              |  | First elected:                                |  | 2001                                                                                                                                                                               
|                              |  | Principal Occupation:                         |  | Professor of Public Economics at Leiden University, Netherlands                                                                                                                    
|                              |  | Supervisory Board Memberships/ Directorships: |  | Royal KPN N.V.; TPG N.V.; Concertgebouw N.V.; PA Holdings Ltd., London                                                                                                             
|                              |  |                                               |  |                                                                                                                                                                                    

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|Dr. Thomas Klebe*               |  | Age:                                          |  | 55                                                                                                                                                                                                                       
|------------------------------- |  | --------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                |  | First elected:                                |  | 2003                                                                                                                                                                                                                     
|                                |  | Principal Occupation:                         |  | Director Department for General Shop Floor Policy and Codetermination, German Metalworkers' Union                                                                                                                        
|                                |  | Supervisory Board Memberships/ Directorships: |  | Saarstahl AG                                                                                                                                                                                                             
|Jürgen Langer*                  |  | Age:                                          |  | 49                                                                                                                                                                                                                       
|                                |  | First elected:                                |  | 2003                                                                                                                                                                                                                     
|                                |  | Principal Occupation:                         |  | Chairman of the Works Council of the Frankfurt/Offenbach Dealership, DaimlerChrysler AG                                                                                                                                  
|Robert J. Lanigan               |  | Age:                                          |  | 75                                                                                                                                                                                                                       
|                                |  | First elected:                                |  | 1998 (Chrysler Corporation: 1984)                                                                                                                                                                                        
|                                |  | Principal Occupation:                         |  | Chairman Emeritus of Owens-Illinois, Inc.; Founder Partner, Palladium Equity Partners                                                                                                                                    
|Helmut Lense*                   |  | Age:                                          |  | 52                                                                                                                                                                                                                       
|                                |  | First elected:                                |  | 1998 (Daimler-Benz AG: 1993)                                                                                                                                                                                             
|                                |  | Principal Occupation:                         |  | Chairman of the Works Council, Stuttgart-Untertürkheim Plant, DaimlerChrysler AG                                                                                                                                         
|Peter A. Magowan                |  | Age:                                          |  | 61                                                                                                                                                                                                                       
|                                |  | First elected:                                |  | 1998 (Chrysler Corporation: 1986)                                                                                                                                                                                        
|                                |  | Principal Occupation:                         |  | President of San Francisco Giants                                                                                                                                                                                        
|                                |  | Supervisory Board Memberships/ Directorships: |  | Safeway Inc.; Caterpillar Inc.; Spring Group plc                                                                                                                                                                         
|William A. Owens                |  | Age:                                          |  | 63                                                                                                                                                                                                                       
|                                |  | First elected:                                |  | 2003                                                                                                                                                                                                                     
|                                |  | Principal Occupation:                         |  | Senior Advisor AEA Investors LLC                                                                                                                                                                                         
|                                |  | Supervisory Board Memberships/ Directorships: |  | Telstra Corp.; Nortel Networks Corp.; British American Tobacco; Symantec Corp.; Polycom Inc.; Tibco Software Inc.; Cray Inc.; Wireless Facilities Inc.; Viasat Inc.; IDT Corp.; Metal Storm Ltd.; BioLase
Technology Inc.
|Gerd Rheude*                    |  | Age:                                          |  | 58                                                                                                                                                                                                                       
|                                |  | First elected:                                |  | 1999                                                                                                                                                                                                                     
|                                |  | Principal Occupation:                         |  | Chairman of the Works Council, Wörth Plant, DaimlerChrysler AG                                                                                                                                                           
|Udo Richter*                    |  | Age:                                          |  | 57                                                                                                                                                                                                                       
|                                |  | First elected:                                |  | 2001                                                                                                                                                                                                                     
|                                |  | Principal Occupation:                         |  | Chairman of the Works Council, Bremen Plant, DaimlerChrysler AG                                                                                                                                                          
|Wolf Jürgen Röder*              |  | Age:                                          |  | 56                                                                                                                                                                                                                       
|                                |  | First elected:                                |  | 2000                                                                                                                                                                                                                     
|                                |  | Principal Occupation:                         |  | Member of the Executive Council, German Metalworkers' Union                                                                                                                                                              
|                                |  | Supervisory Board Memberships/ Directorships: |  | Robert Bosch GmbH                                                                                                                                                                                                        
|Dr. rer. pol.
Manfred Schneider |  | Age:
First elected:                           |  | 65
1998 (Daimler-Benz AG: 1993)                                                                                                                                                                                          
|                                |  | Principal Occupation:                         |  | Chairman of the Supervisory Board of Bayer AG                                                                                                                                                                            
|                                |  | Supervisory Board Memberships/ Directorships: |  | Allianz AG; Metro AG; RWE AG; Linde AG; TUI AG                                                                                                                                                                           
|                                |  |                                               |  |                                                                                                                                                                                                                          

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|Stefan Schwaab*       |  | Age:                                          |  | 51                                                                                                                                                                                        
|--------------------- |  | --------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                      |  | First elected:                                |  | 2000                                                                                                                                                                                      
|                      |  | Principal Occupation:                         |  | Vice Chairman of the Works Council, Gaggenau Plant, DaimlerChrysler AG; Vice Chairman of the Corporate Works Council, DaimlerChrysler AG and DaimlerChrysler Group                        
|Bernhard Walter       |  | Age:                                          |  | 61                                                                                                                                                                                        
|                      |  | First elected:                                |  | 1998 (Daimler-Benz AG: 1998)                                                                                                                                                              
|                      |  | Principal Occupation:                         |  | Former Chairman of the Board of Managing Directors of Dresdner Bank AG                                                                                                                    
|                      |  | Supervisory Board Memberships/ Directorships: |  | Bilfinger Berger AG; Deutsche Telekom AG; Henkel KGaA; KG Allgemeine Leasing GmbH & Co.; mg technologies ag; Staatliche Porzellan-Manufaktur Meissen GmbH; ThyssenKrupp AG; Wintershall AG
|Lynton R. Wilson      |  | Age:                                          |  | 63                                                                                                                                                                                        
|                      |  | First elected:                                |  | 1998 (Chrysler Corporation: 1994)                                                                                                                                                         
|                      |  | Principal Occupation:                         |  | Chairman of the Board of CAE Inc.; Chairman of the Board of Nortel Networks Corporation                                                                                                   
|                      |  | Supervisory Board Memberships/ Directorships: |  | CAE, Inc.; DaimlerChrysler Canada Inc.; Nortel Networks Corp.                                                                                                                             
|Dr.-Ing. Mark Wössner |  | Age:                                          |  | 65                                                                                                                                                                                        
|                      |  | First elected:                                |  | 1998 (Daimler-Benz AG: 1998)                                                                                                                                                              
|                      |  | Principal Occupation:                         |  | Former CEO and Chairman of the Supervisory Board of Bertelsmann AG                                                                                                                        
|                      |  | Supervisory Board Memberships/ Directorships: |  | Citigroup Deutschland; Douglas Holding AG; Dussmann AG & Co. KGaA; eCircle AG; Loewe AG; Reuters AG; thorborgnet GmbH & Co. KGaA                                                          

Our
supervisory board has established and maintains the following committees responsible for audit and compensation matters:



The
business address of the members of our supervisory board is the same as our business address, Epplestrasse 225, 70567 Stuttgart, Germany.

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BOARD OF MANAGEMENT

Our articles of association require our board of management to have at least two members. Our supervisory board determines the size of the board of management and
appoints its members. Our supervisory board may also appoint deputy members to the board of management. Our board of management currently has eleven members.

Our
supervisory board appoints each member of the board of management for a maximum term of five years. The supervisory board may reappoint members of the board of management for one or
more additional terms of up to five years each. Once a member of our board of management has reached age 60, the supervisory board may reappoint that member only in one-year increments,
except in special circumstances. The supervisory board may remove a member of the board of management prior to the expiration of his term if he commits a serious breach of duty, if the member is
incapable of carrying out his duties or if there is a vote of no confidence by a majority of the votes cast at an annual general meeting of shareholders.

A
member of the board of management is under a duty to disclose any material interest the member has in proposals, arrangements or contracts between us and third parties. Significant
transactions between a member of the board of management and us or one of our subsidiaries require the approval of the supervisory board.

The
following table shows the name and age (as of February 19, 2004) of each current member of our board of management, the year in which he was first appointed to the board of
management, the year in which his term expires, his current position/area of responsibility and any prior positions he held within the last five years.

The
table also reflects actions of the supervisory board concerning the board of management. Effective December 16, 2003, it extended the terms of Dr. Cordes and
Dr. Zetsche by five years to 2008 and the term of Dr. Gentz by one year to 2004 to ensure continuity on the board of management; it extended the term of Mr. Sidlik by five years
to 2008 with added responsibility for global procurement and supply; and it entrusted Dr. Grube with responsibility for the Group's alliance with Mitsubishi Motors. The terms of
Dr. Bischoff, Dr. Mangold and Mr. Valade expired on December 15, 2003, and DaimlerChrysler has retained or intends to retain each of them to render advisory services.
Effective December 16, 2003, the supervisory board also appointed Mr. Bodo Uebber as a deputy member of the board of management, with responsibility for DaimlerChrysler Services.
Effective October 1, 2004, the supervisory board extended the term of Mr. Günther Fleig by five years to 2009.

On
February 18, 2004 our supervisory board made several decisions regarding the future composition of the board of management. Effective December 16, 2004,
Mr. Uebber will become a full member of the board of management and assume responsibility for Finance & Controlling in addition to his present responsibility for Daimler Chrysler
Services. Mr. Uebber's term of office remains unchanged. The term of Dr. Gentz, who is currently responsible for Finance & Controlling, will expire on December 15, 2004.
Effective May 1, 2004, Dr. Bernhard will assume responsibility for the Mercedes Car Group. Dr. Bernhard's term of office remains unchanged. Dr. Bernhard will head the
division in cooperation with Prof. Hubbert for three months. Also effective May 1, 2004, Dr. Weber will become a full member of the board of management and assume the duties of the
development area at Mercedes Car Group in addition to his present responsibility for Research & Development. Dr. Weber's term of office remains unchanged. Prof. Hubbert will assume
responsibility for the Executive Automotive Committee on the board of management effective August 1, 2004, and his term of office also remains unchanged. Thomas W. LaSorda is appointed as
deputy member of the board of management effective May 1, 2004, succeeding Dr. Bernhard as Chief Operating Officer Chrysler Group.

The
supervisory board also expressed its intention to extend the contract of Prof. Schrempp for an additional three years at a future meeting.

| |  |  |  | 
| |  |  |  | 

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|Prof. Jürgen E. Schrempp        |  | Age:
First appointed:
Term expires:
Current Position:
Prior Position(s): |  | 59
1998 (Daimler-Benz AG: 1987)
2005
Chairman of the Board of Management
Chairman of the Board of Management of Daimler-Benz AG                                                                                                                                                                     
|------------------------------- |  | ------------------------------------------------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Dr. rer. pol.
Wolfgang Bernhard |  | Age:
First appointed:
Term expires:
Current Position:
Prior Position(s): |  | 43
2000
2007
Chief Operating Officer Chrysler Group
Deputy Member of the Board of Management, DaimlerChrysler AG, COO Chrysler Group; CEO of Mercedes-AMG GmbH; General Manager for S-Class assembly at the Sindelfingen Plant, DaimlerChrysler AG                                                  
|Dr. rer. pol. Eckhard Cordes    |  | Age:
First appointed:
Term expires:
Responsible for:
Prior Position(s):  |  | 53
1998 (Daimler-Benz AG: 1996)
2008
Commercial Vehicles
Member of the Board of Management of DaimlerChrysler AG  Corporate Development & IT-Management                                                                                                                                            
|Günther Fleig                   |  | Age:
First appointed:
Term expires:
Responsible for:
Prior Position(s):  |  | 55
1999
2009
Human Resources & Labor Relations Director
President of DaimlerChrysler France S.A.S., DaimlerChrysler Holding S.A. France and Head of the Corporate Representation Office, France; President of Mercedes-Benz France                                                                  
|Dr. iur. Manfred Gentz          |  | Age:
First appointed:
Term expires:
Responsible for:
Prior Position(s):  |  | 62
1998 (Daimler-Benz AG: 1983)
2004
Finance & Controlling
Member of the Board of Management of Daimler-Benz AG  Finance & Controlling                                                                                                                                                             
|Dr. phil. Rüdiger Grube         |  | Age:
First appointed:
Term expires:
Responsible for:
Prior Position(s):  |  | 52
2001
2007
Corporate Development
Deputy Member of the Board of Management, Corporate Development, DaimlerChrysler AG; Senior Vice President Corporate Development of DaimlerChrysler AG; CEO of Häussler Group; Head of Corporate Strategy and Member of the Executive Board of
DaimlerChrysler AG
|                                |  |                                                                          |  |                                                                                                                                                                                                                                                                                                     

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|Prof. Jürgen Hubbert                  |  | Age:
First appointed:
Term expires:
Responsible for:
Prior Position(s): |  | 64
1998 (Daimler-Benz AG: 1987)
2005
Mercedes Car Group
Member of the Board of Management of Daimler-Benz AG  Passenger Cars                                                                                                            
|------------------------------------- |  | ----------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Thomas W. Sidlik                      |  | Age:
First appointed:
Term expires:
Responsible for:
Prior Position(s): |  | 54
1998 (Chrysler Corporation: 1992)
2008
Global Procurement & Supply
Member of the Board of Management of DaimlerChrysler AG  Procurement & Supply Chrysler Group                                                                      
|Dr.-Ing. Dieter Zetsche               |  | Age:
First appointed:
Term expires:
Responsible for:
Prior Position(s): |  | 50
1998 (Daimler-Benz AG: 1997)
2008
Chrysler Group
Member of the Board of Management of DaimlerChrysler AG  Commercial Vehicles; Member of the Board of Management of DaimlerChrysler AG  Sales and Marketing                         
|Bodo Uebber
(Deputy member)           |  | Age:
First appointed:
Term expires:
Responsible for:
Prior Position(s): |  | 44
2003
2006
Services
Member of the Board of Management and CFO of DaimlerChrysler Services AG; Vice President and CFO  Finance/Controlling and IT/Services of MTU Aero Engines GmbH                                                    
|Dr.-Ing. Thomas Weber
(Deputy member) |  | Age:
First appointed:
Term expires:
Responsible for:
Prior Position(s): |  | 49
2003
2005
Research & Technology
Vice President, Speaker of the Model Series A-Class and Rastatt Plant Manager; Director, Engine Plant Stuttgart-Untertürkheim; Director V6/V8 Engine Plant Stuttgart-Bad Cannstatt, DaimlerChrysler AG

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COMPENSATION

Supervisory Board

The compensation we pay to our supervisory board members is set forth in our articles of association. Each member of our supervisory board receives [EURO]75,000
annually for serving on the board plus reimbursement of expenses. The chairman of our supervisory board receives three times that amount. We pay twice this amount
to the deputy chairman of the supervisory board and the chairman of the Audit Committee, 1.5 times this amount to the chairmen of other supervisory board committees, and 1.3 times this amount to all
other members of our supervisory board committees. If a member of the supervisory board occupies more than one of these positions, we only pay the compensation payable for the highest-paying function
held by that member. All members of the supervisory board receive a flat fee of [EURO]1,100 for each meeting of the supervisory board and each committee meeting they attend. Supervisory board members
receive no benefits upon termination of their service.

The
aggregate amount of compensation we paid to all members of our supervisory board, as a group, for services to us in all capacities for the year ended December 31, 2003, was
[EURO]2.8 million.

Board of Management

We have entered into service agreements with members of our board of management. These agreements establish the following four principal elements of compensation:



The
presidential committee of our supervisory board has also established stock ownership guidelines for the board of management. These guidelines require that some portion of the
personal assets of the members of our board of management consist of DaimlerChrysler shares. In accordance with these guidelines, members of our board of management had to invest part of their 2003
incentive-based compensation in DaimlerChrysler shares.

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The
aggregate amount of compensation we paid to all members of the board of management, as a group, for services to us in all capacities for the year ended December 31, 2003, was
[EURO]40.8 million, of which [EURO]13.4 million consisted of fixed compensation, including benefits in kind, and [EURO]27.4 million of short-term and
mid-term incentive remuneration components. The aggregate amount accrued by us during the year ended December 31, 2003, to provide pension, retirement and similar benefits for the
members of the board of management was [EURO]14.7 million.

For
further information regarding compensation of our supervisory board and our board of management, please refer to Note 37 to our Consolidated Financial Statements. For further
information regarding stock based compensation and incentives, please refer to Notes 1 and 24 to our Consolidated Financial Statements.

EMPLOYEES AND LABOR RELATIONS

At December 31, 2003, we employed a workforce of 362,063 people worldwide, which represented a decrease of 1% from year-end 2002. This decrease
resulted primarily from the sale of our MTU Aero Engines business. The decrease in 2002 was mainly the result of workforce reductions in the context of the turnaround plan implemented at Chrysler
Group and our plant dispositions, for example X-Cellsis, Eurostar Graz and Dayton Thermal. For further information on the status of the turnaround plan of Chrysler Group, please refer to
the discussion under the heading "Description of Business Segments" in "Item 4. Information on the Company."

As
a result of the sale of MTU Aero Engines, the employees of this business unit are not included in the 2003 amounts. The total number of employees for the years 2002 and 2001 comprised
8,376 and 7,839 employees of MTU Aero Engines, respectively.

Of
the total number of our employees, 182,739 employees were based in Germany and 102,391 in the United States. The following table shows the number of our employees at
December 31, 2003, 2002 and 2001:

|                                           |  | Employees at December 31,
|------------------------------------------ |  | -------------------------
|
|
|Mercedes Car Group                         |  | 104,151                  
|Chrysler Group                             |  | 93,062                   
|Commercial Vehicles                        |  | 95,062                   
|Sales organization for automotive business |  | 45,609                   
|Services                                   |  | 11,035                   
|Other Activities1,2                        |  | 13,144                   
|                                           |  |                          
|DaimlerChrysler Group                      |  | 362,063                  
|                                           |  |                          

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On average, we had approximately 9,500 temporary employees in 2003.

Almost
all our employees in Germany who are members of labor unions belong to the German metalworkers' union (Industriegewerkschaft
Metall). We do not operate any of our facilities in Germany on a "closed shop" basis. In Germany, the regional association of the companies within a particular industry and the
unions covering that industry negotiate collective bargaining agreements for blue collar workers and for white collar employees below management level. We are a member of the associations of employers
in the regions in which we operate. Even though the collective bargaining agreement is legally binding only for

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members
of the negotiating parties, i.e., the member companies of the employers' associations and the employees who are union members, we extend the applicability of the agreement to all employees
below senior management level by including a pertinent clause in our employment contracts.

On
February 12, 2004, the regional association of employers and the representatives of the metalworkers' union concluded a new collective bargaining agreement covering the period
from March 1, 2004, through February 28, 2006. The agreement provides that a portion of the overall negotiated pay increases will not be paid out to employees, but instead will be used
to finance a new collective framework agreement intended to reform the remuneration system for employees within the German metal industry by 2006. For the period March 1, 2004, through
February 28, 2005, the collective bargaining agreement calls for an aggregate 2.2% wage increase for all employees. Of this increase, employees will receive a portion as lump sum payments in
March and October 2004. After deducting the lump sum payments and the amount held back to finance the new collective framework agreement, the wage increase for that period will be approximately
1.5%. For the period March 1, 2005, through February 28, 2006, the agreement provides for an aggregate 2.7% wage increase for all employees. Of this increase, employees will receive a
portion as lump sum payments in March and October 2005. After deducting the lump sum payments and the amount held back to finance the new collective framework agreement, the wage increase for
that period will be approximately 2.0%.

The
total wage increases for both periods do not apply to elements of compensation which the employer pays voluntarily and which go beyond the compensation level fixed in the collective
bargaining agreement. We have not yet determined whether we will voluntarily apply the wage increases for these periods to compensation elements exceeding the level fixed in the collective bargaining
agreement.

In
the United States and Canada, most of the hourly employees and 27% of the salaried employees of the Chrysler Group are represented by unions. The United Automobile, Aerospace, and
Agricultural Implement Workers of America (UAW) and the National Automobile, Aerospace, Transportation and General Workers Union of Canada (CAW) represent substantially all of these represented
employees.

In
September 2003, DaimlerChrysler Corporation and the UAW agreed on terms for a four-year collective bargaining agreement covering more than 58,000 hourly and
salaried workers in the United States. The agreement provides that each eligible employee will receive an annual base wage increase of 2% in September 2005 and 3% in September 2006, a
one-time up front lump sum payment in 2003 of $3,000, and a one-time lump sum payment in October 2004 equal to 3% of his or her qualified earnings. The agreement also
provides for increases in pension benefit rates, and changes in some health care, supplemental unemployment and other benefits. The agreement allows DaimlerChrysler Corporation to close or sell
several specified facilities as an exception to a general limitation on its ability to close plants, reduce employment levels, or dispose of operations that constitute a UAW bargaining unit. It also
provides flexibility in establishing job assignments and work rules in order to increase productivity in plants. Historically, along with a national agreement, DaimlerChrysler Corporation also
negotiates local agreements with UAW bargaining units at each of its facilities. That process is currently underway.

In
October 2002, DaimlerChrysler Canada, Ltd. and the CAW agreed to a three-year collective bargaining agreement that covers approximately 9,500 workers in
Canada. It provides for an annual base wage increase of 3% in each of the first two contract years and a 2% increase in the last year, a one-time lump sum payment of $1,000 per full time
worker, as well as increases in other benefits.

SHARE OWNERSHIP

As of December 31, 2003, the current members of our supervisory board and our board of management, as a group, owned 243,211 of our ordinary shares (0.02%
of all outstanding shares), and had the right to acquire 8,735,060 ordinary shares under the option plans described.

Our
predecessor, Daimler-Benz AG, instituted a shareholder approved stock option plan for management board members and other senior executives in 1996. For reasons of German
law applicable at the time, the

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options
granted under this plan took the form of conversion rights attached to convertible bonds, with the principal amount corresponding to a stated value (or par value equivalent) of the ordinary
shares subject to the option. This stated value was [EURO]2.56 per ordinary share in all cases and the optionee paid this amount in cash at the time he or she received the convertible bond (or
option). The optionholders have the right to exercise the conversion rights under the 1996 plan during specified three-week window periods on or before July 12, 2006, at a
conversion price of [EURO]42.62 per ordinary share. Conversion rights are only exercisable if the price per share exceeds a threshold of [EURO]49.01.

In
2000, we instituted a shareholder approved stock option plan for board of management members and other levels of management. Options granted in 2000 under this stock option plan are
exercisable at a reference price of [EURO]62.30 plus a 20% exercise premium. They became exercisable in two equal installments on April 21, 2002 and on April 21, 2003 and expire on
April 21, 2010. If the market price per ordinary share on the date of exercise is at least 20% higher than the reference price, the holder is additionally entitled to receive a cash payment
equal to the original exercise premium of 20% multiplied by the number of stock options exercised. In May 2000, several shareholders challenged the approval of the stock option plan at the
shareholders' meeting on April 19, 2000. In October 2000, the Stuttgart District Court (Landgericht Stuttgart) dismissed the case and the
Stuttgart Court of Appeals (Oberlandesgericht Stuttgart) dismissed an appeal in June 2001. The shareholders appealed the decision of the
Stuttgart Court of Appeals (Revision) to the Federal Supreme Court (Bundesgerichtshof) in
July 2001. In March 2002 the Federal Supreme Court decided not to admit the appeal. In April 2002, the shareholders appealed to the Federal Constitutional Court
(Bundesverfassungsgericht). In May 2003, the Federal Constitutional Court decided not to admit the constitutional complaint.

In
2001, we granted board of management members and other levels of management stock options under the shareholder approved option plan. Those options are exercisable at a reference
price of [EURO]55.80 plus a 20% exercise premium. They become exercisable in two equal installments on April 1, 2003 and on April 1, 2004 and expire on April 1, 2011. If the
market price per ordinary share on the date of exercise is at least 20% higher than the reference price, the holder is additionally entitled to receive a cash payment equal to the original exercise
premium of 20% multiplied by the number of stock options exercised.

In
2002, we granted board of management members and other levels of management stock options under the shareholder approved option plan. Those options are exercisable at a reference
price of [EURO]42.93 plus a 20% exercise premium. They become exercisable in two equal installments on April 1, 2004 and on April 1, 2005 and expire on April 1, 2012. If the
market price per ordinary share on the date of exercise is at least 20% higher than the reference price, the holder is additionally entitled to receive a cash payment equal to the original exercise
premium of 20% multiplied by the number of stock options exercised. For a description of options granted in 2003, see the discussion under the heading "Compensation."

Please
refer to "Compensation" as well as Notes 1 and 37 to our Consolidated Financial Statements for additional details on options granted to members of our board of management.

As
part of our value-based management approach, we support employee stock ownership. We offer the opportunity to purchase our ordinary shares to employees of our companies incorporated
in Germany, Austria, France, Italy, the Netherlands, Portugal, Spain, Switzerland and the United Kingdom. In 2003, each eligible employee of our companies incorporated in Germany had the right to
acquire up to 90 shares with a maximum aggregate discount of [EURO]154 plus one bonus share. Employees of our German companies acquired a total of 1,241,772 shares in 2003. The programs established
for employees in other European countries follow the German program except for changes resulting from different national legal requirements. In these countries, employees acquired a total of
approximately 28,000 shares in 2003.

In
addition, under the option plan pursuant to which we provided options to members of our board of management in 2003 we also provided options to other levels of management.

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Item 7. Major Shareholders and Related Party Transactions.

MAJOR SHAREHOLDERS

Our capital stock consists of ordinary shares without par value (Stückaktien). Our ordinary shares
are issued in registered form. Under our memorandum and articles of association (Satzung), each ordinary share represents one vote. Major shareholders
do not have different voting rights.

Under
the German Securities Trading Act (Wertpapierhandelsgesetz), shareholders of a listed German company must notify the company of the
level of their holding whenever it reaches, exceeds, or falls below specified thresholds. These thresholds are 5%, 10%, 25%, 50% and 75% of a company's outstanding voting rights.

The
table below shows, as of December 31, 2003, holders of 5% or more of our ordinary shares, the number of ordinary shares they hold, and their percentage ownership:

Identity of Person or Group

Shares Owned

PercentDB Value GmbH, a wholly owned subsidiary of Deutsche Bank AG1

119,818,714

11.8
%Kuwait Investment Authority as agent for the Government of the State of Kuwait

73,169,320

7.2
%


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As of December 31, 2003, we had approximately 1.8 million stockholders. Approximately 240,000 were U.S. holders, of which
approximately 70,000 were record holders. Based on our share register, U.S. holders held approximately 15% of our ordinary shares as of that date.

For
further information, you should read "Share Ownership" in "Item 6. Directors, Senior Management and Employees."

RELATED PARTY TRANSACTIONS

We purchase materials, supplies and services from numerous suppliers throughout the world in the ordinary course of our business. These suppliers include firms in
which we hold an ownership interest and firms that are affiliated with some members of our Supervisory Board.

DB
Value GmbH, a wholly owned subsidiary of Deutsche Bank AG, owns approximately 11.8% of our outstanding shares. Deutsche Bank AG and its subsidiaries provided us with various financial
and other services for which we paid them reasonable and customary fees. We have guaranteed the obligations of our employees under our corporate credit card program for corporate travel expenses with
Deutsche Bank AG in the event the employees default on their obligations to Deutsche Bank AG. This guarantee amounted to [EURO]0.7 billion in 2003. We have never incurred nor do we expect to
incur any significant losses under this guarantee.

We
have provided several guarantees for the benefit of Toll Collect GmbH, in which we hold a 45% equity interest. For additional information, please refer to "Off-balance
Sheet Arrangements" in "Item 5. Operating and Financial Review and Prospects" and to Note 31 to our Consolidated Financial Statements for additional information on these guarantees.

We
beneficially own a 37.0% equity interest in Mitsubishi Motors Corporation. Mitsubishi Motor Manufacturing of America, a subsidiary of Mitsubishi Motors Corporation, produces the Dodge
Stratus and Chrysler Sebring coupes for us.

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We
have an agreement with McLaren Cars Ltd., a wholly owned subsidiary of TAG McLaren Holdings Ltd., for the design and production of a new high-performance
sports car, the SLR, which we expect to introduce to the markets in the first quarter of 2004. We own a 40% equity interest in TAG McLaren Holdings Ltd.

In
May 2002, DaimlerChrysler Corporation sold its Dayton Thermal Products facility to Behr Dayton Thermal Products LLC, a joint venture company in which Behr America, Inc.
owns a majority interest and DaimlerChrysler Corporation owns a minority interest. DaimlerChrysler Corporation is required to maintain its minority interest until May 1, 2004, at which time
Behr America will acquire DaimlerChrysler Corporation's minority interest. Please refer to Note 7 to our Consolidated Financial Statements for additional information.

In
conjunction with the above transactions, DaimlerChrysler Corporation and Behr Dayton entered into a supply agreement from April 2002 through April 2008. Product pricing
was based on the existing cost structure of the Dayton Thermal Products Plant and was comparable to pricing in effect prior to the transaction. The supply agreement included the potential for price
reductions in future years based on productivity and other gains by Behr Dayton. There is no minimum purchase volume commitment included in the agreement. DaimlerChrysler Corporation agreed that Behr
Dayton would be the exclusive provider of certain climate control components for existing and specific future vehicles through the end of the contract term. There was no value assigned to the supply
agreement.

Our
subsidiaries DaimlerChrysler Services AG, DaimlerChrysler Coordination Center S.A. and DaimlerChrysler Aerospace AG granted a series of loans to debis AirFinance B.V., an aircraft
leasing and finance company. Through our subsidiaries DaimlerChrysler Services AG and DaimlerChrysler Aerospace AG, we hold a 45% interest in debis Air Finance B.V. The total book value of these loans
as of December 31, 2003, was [EURO]524 million, the highest aggregate amount outstanding during 2003 was [EURO]680 million. The interest rates are partially fixed, partially based
on Libor. We consider those interest rates to be in line with interest terms currently available in the financial markets.

We
incurred expenses of approximately $957,000 in 2003 for advertising and related marketing activities with Black Enterprise magazine. Earl G. Graves, a member of our supervisory board
is the chairman, chief executive officer and sole stockholder of the magazine's ultimate parent company.

Westfalia
Van Conversion GmbH, one of our wholly owned subsidiaries, is involved in a business transaction with Dr. Mark Wössner, a member of our supervisory board.
Mr. Wössner received payments for premises leased to Westfalia Van Conversion GmbH amounting to [EURO]1 million in 2003.

In
2003, we sold a 60% equity interest in our wholly-owned subsidiary Mercedes-Benz Lenkungen GmbH to ThyssenKrupp Automotive AG. Bernhard Walter, a member of our supervisory
board, is also a member of the supervisory board of ThyssenKrupp AG, the acquiror's ultimate parent company. Mr. Walter abstained from voting in the supervisory board's vote on this
transaction.

In
his capacity as Chairman of our International Advisory Board, we reimburse Prof. Victor Halberstadt, a member of our supervisory board, for his office expenses related to developing
the program content for the International Advisory Board. In 2003, this cost reimbursement amounted to [EURO]128,000.

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Item 8. Financial Information.

CONSOLIDATED FINANCIAL STATEMENTS

Please refer to "Item 18. Financial Statements" and to pages F-i, F-1 through F-90 of this annual report.

OTHER FINANCIAL INFORMATION

Export Sales

In 2003, we exported approximately 766,000 or 66% of all passenger cars and commercial vehicles we produced in Germany and approximately 362,000 or 19% of all
passenger cars and trucks we produced in the United States to other countries.

Legal Proceedings

Various legal proceedings are pending against the Group. We believe that such proceedings in the main constitute ordinary routine litigation incidental to our
business. For information on regulatory and administrative proceedings please also refer to the discussion under the heading "Government Regulation and Environmental Matters 
Environmental Matters" in "Item 4. Information on the Company".

Various
legal proceedings pending against our subsidiary DaimlerChrysler Corporation allege defects in various components (including occupant restraint systems, seats, brake systems,
ball joints and fuel systems) in several different vehicle models or allege design defects relating to vehicle stability (rollover propensity), pedal misapplication (sudden acceleration), brake
transmission shift interlock, or crashworthiness. Some of these proceedings are filed as class action lawsuits that seek repair or replacement of the vehicles or compensation for their alleged
reduction in value, while others seek recovery for personal injuries. Adverse decisions in these proceedings could require DaimlerChrysler Corporation to pay substantial compensatory and punitive
damages, or undertake service actions, recall campaigns or other costly actions.

Three
purported class action lawsuits are pending in various U.S. courts that allege that the paint applied to 1982-1997 model year Chrysler, Plymouth, Jeep® and
Dodge vehicles delaminates, peels or chips as the result of defective paint, paint primer, or application processes. Plaintiffs seek compensatory and punitive damages, costs of repair or replacement,
attorneys' fees and costs. Seven other previously reported class action lawsuits regarding paint delamination have been dismissed.

Like
other companies in the automotive industry, we (primarily DaimlerChrysler Corporation) have experienced a growing number of lawsuits which seek compensatory and punitive damages for
illnesses alleged to have resulted from direct and indirect exposure to asbestos used in some vehicle components (principally brake pads). Typically, these suits name many other corporate defendants
and may also include claims of exposure to a variety of non-automotive asbestos products. A single lawsuit may include claims by multiple plaintiffs alleging illness in the form of
asbestosis, mesothelioma or other cancer or illness. The number of claims in these lawsuits increased from approximately 14,000 at the end of 2001 to approximately 28,000 at the end of 2003. In the
majority of these cases, plaintiffs do not specify their alleged illness and provide little detail about their alleged exposure to components in our vehicles. Some plaintiffs do not exhibit current
illness, but seek recovery based on potential future illness. In 2001, we and other automobile manufacturers asked the federal bankruptcy court in Delaware overseeing the bankruptcy proceedings of an
automotive supplier, Federal-Mogul Corporation, to consolidate all of the asbestos brake cases pending in state courts throughout the U.S. with the asbestos brake litigation involving Federal-Mogul
supervised by the bankruptcy court. We believed that consolidation would reduce the cost and complexity of defending these individual cases. In 2002, the bankruptcy court decided that it did not have
the authority to consolidate these cases, and the U.S. Court of Appeals upheld that decision. The U.S. Supreme Court in January 2003 denied our request and that of other manufacturers to review
the decision. We believe that many of these lawsuits involve unsubstantiated illnesses or assert only tenuous connections with components in our vehicles, and that there

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is
credible scientific evidence to support the dismissal of many of these claims. Although our expenditures to date in connection with such claims have not been material to our financial condition, it
is possible that the number of these lawsuits will continue to grow, especially those alleging life-threatening illness, and that the company could incur significant costs in the future in
resolving these lawsuits.

As
previously reported, the Antitrust Division of the U.S. Department of Justice, New York Regional Office, opened a criminal investigation in connection with the allegations made in a
lawsuit filed in 2002 in the United States District Court for the District of New Jersey against our subsidiary Mercedes-Benz
USA, LLC (MBUSA), and its wholly-owned subsidiary Mercedes-Benz Manhattan, Inc. The Department of Justice advised those companies in the third quarter of 2003 that it had closed the
investigation and will take no further action. The lawsuit, certified as a class action in 2003, alleges that those companies participated in a price fixing conspiracy among Mercedes-Benz
dealers. MBUSA and Mercedes-Benz Manhattan will continue to defend themselves vigorously.

As
previously reported, we received a "statement of objections" from the European Commission on April 1, 1999, which alleged that we violated European Union competition rules by
impeding cross-border sales of Mercedes-Benz passenger cars to final customers in the European Economic Area. In October 2001, the European Commission found that we infringed
European Union competition rules and imposed a fine of approximately [EURO]72 million. Our appeal against this decision is still pending before the European Court of Justice.

As
previously reported, in 2003 approximately 80 purported class action lawsuits alleging violations of antitrust law were filed against us and several of our U.S. subsidiaries, six
other motor vehicle manufacturers, operating subsidiaries of those companies in both the United States and Canada, the National Automobile Dealers Association and the Canadian Automobile Dealers
Association. Some complaints were filed in federal courts in various states and others were filed in state courts. The complaints allege that the defendants conspired to prevent the sale to U.S.
consumers of vehicles sold by dealers in Canada in order to maintain new car prices at artificially high levels in the U.S. They seek treble damages on behalf of everyone who bought or leased a new
vehicle in the U.S. since January 1, 2001. We believe the complaints are without merit and plan to defend ourselves against them vigorously.

As
previously reported, our subsidiary, DaimlerChrysler Services North America LLC (DCSNA) is subject to various legal proceedings in federal and state courts, some of which allege
violations of state and federal laws in connection with financing motor vehicles. Some of these proceedings seek class action status, and may ask for compensatory, punitive or treble damages and
attorneys' fees. In October 2003, the Civil Rights Division of the Department of Justice and the United States Attorney's Office for the Northern District of Illinois advised that they are
initiating an investigation of DCSNA's credit practices that focuses on DCSNA's Chicago Zone Office. The investigation follows a lawsuit filed in February, 2003, against DCSNA in Chicago with the
United States District Court for the Northern District of Illinois that alleges that the DCSNA Chicago Zone Office engaged in racially discriminatory credit and collection practices in violation of
federal and state laws. In that lawsuit, six individuals filed a purported class action complaint on behalf of African-Americans in the region alleging that they were denied vehicle financing based on
race. They seek compensatory and punitive damages, and injunctive relief barring discriminatory practices. The lawsuit was later amended to include Hispanic-Americans. DCSNA believes that its
practices are fair and not discriminatory. DCSNA intends to defend itself vigorously against these claims.

As
a member of a consortium that has agreed to develop and operate a toll collection system for German highways, we and the other consortium members have received a claim for damages
from the Federal Republic of Germany. The government is seeking reimbursement of revenues lost due to the delay in completion of the system. The Federal Republic of Germany is claiming
[EURO]156 million per month from September 1 through December 31, 2003 and [EURO]180 million per month thereafter. The Federal Republic of Germany is also seeking
contractual penalties of approximately [EURO]680 million, based on a claim that the consortium members did not obtain the government's consent before entering into several
sub-supplier contracts. In addition, the Federal

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Republic
of Germany is claiming other time-dependent contractual penalties. We believe the government's claims are without merit and we intend to defend ourselves vigorously against these
claims. The agreement between the consortium members and the Federal Republic of Germany calls for submission of all disputes related to the toll collection system to arbitration. The Federal Republic
of Germany has clearly indicated that it will submit these claims for arbitration.

As
reported in our 2002 annual report, Freightliner LLC, DaimlerChrysler's North American commercial vehicles subsidiary, acquired in September 2000 Western Star Trucks
Holdings Ltd., a Canadian company engaged in the design, assembly, and distribution of heavy duty trucks and transit buses. Prior to its acquisition by Freightliner, Western Star had completed
the sale of ERF (Holdings) plc, a company organized in England and Wales and engaged in the assembly and sale of heavy duty trucks, to MAN AG and MAN Nutzfahrzeuge AG for CAD195 million. In
September 2002, MAN filed a claim against Freightliner Ltd. (formerly Western Star) with the London Commercial Court for breach of representations and warranties in the share purchase
agreement, alleging that ERF's accounts and financial statements were misstated. MAN seeks damages in excess of GBP300 million. Freightliner Ltd. intends to defend itself vigorously
against such claims and has filed a contribution claim against Ernst & Young, ERF's auditors, with the London Commercial Court in the second quarter of 2003.

As
previously reported, on April 30, 2001, we sold our subsidiary, DaimlerChrysler Rail Systems GmbH, (also known as Adtranz), to Bombardier, Inc., for cash consideration
of $725 million. In July 2002, Bombardier filed a request for arbitration with the International Chamber of Commerce in Paris, and asserted claims for sales price adjustments under the
terms of the sale and purchase agreement as well as claims for alleged breaches of contract and misrepresentations. Bombardier seeks total damages of approximately [EURO]960 million. The
agreement limits the amount of such price adjustments to [EURO]150 million, and, to the extent legally permissible, the amount of other claims to an additional [EURO]150 million. We
continue defending against such claims vigorously.

In
the fourth quarter of 2000, Tracinda Corporation filed a lawsuit in the United States District Court for the District of Delaware against DaimlerChrysler AG and some of the members of
its supervisory board and board of management (Mr. Kopper, Prof. Schrempp and Dr. Gentz). Shortly thereafter, other plaintiffs filed a number of actions against the same defendants,
making claims similar to those in the Tracinda complaint. Two individual lawsuits and one consolidated class action lawsuit were originally pending. The plaintiffs, current or former DaimlerChrysler
shareholders, alleged that the defendants violated U.S. securities law and committed fraud in obtaining approval from Chrysler stockholders of the business combination between Chrysler and
Daimler-Benz in 1998. The consolidated class action complaint contained additional allegations that were later dismissed. In March 2003, the Court granted Mr. Kopper's motion
to dismiss each of the complaints against him on the ground that the Court lacked jurisdiction over him. In February 2003, the DaimlerChrysler defendants filed motions seeking summary judgment
on all claims in the cases on several grounds, including that the claims are barred by the statute of limitations. In June 2003, the Court denied defendants' motion relating to the statute of
limitations. In August 2003, DaimlerChrysler agreed to settle the consolidated class action case for $300 million (approximately [EURO]240 million adjusted for currency effects),
and shortly thereafter, DaimlerChrysler concluded a settlement with Glickenhaus, one of the two individual plaintiffs. On February 5, 2004, the Court issued a final order approving the
settlement of the consolidated class action case and ordering its dismissal. The settlements did not affect the case brought by Tracinda, which claims to have suffered damages in the range of
$856 million to $1.28 billion. In November 2003, the Court denied the remaining aspects of defendants' motion for summary judgment. The Tracinda case went to trial in
December 2003 and continued for approximately two weeks. Trial of the case was suspended with approximately two days of trial time remaining while the parties addressed a discovery issue in a
separate hearing. The trial reconvened on February 9, 2004, and was completed on February 11, 2004. It is difficult to predict when the Court might render a decision, although we doubt
it will be before the fourth quarter of 2004.

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As
previously reported in 2002, several lawsuits were filed asserting claims relating to the practice of apartheid in South Africa before 1994. More specifically, on November 11,
2002, the Khulumani Support Group (which purports to represent 32,700 individuals) and several individual plaintiffs filed a lawsuit captioned Khulumani v. Barclays National Bank Ltd., Civ. A.
No. 02-5952 (E.D.N.Y.) in the United States District Court for the Eastern District of New York against 22 American, European, and Japanese companies, including DaimlerChrysler AG
and Daimler-Benz Industrie. The lawsuit purports to relate to the period from 1960 to 1993. On November 19, 2002, another putative class action lawsuit, Ntsebeza v.
Holcim Ltd., No. 02-74604 (RWS) (E.D. Mich.), was filed in the United States District Court for the Eastern District of Michigan against four American and European companies,
including DaimlerChrysler Corporation, and purports to cover the period from 1948 to 1993. Both cases were consolidated for pretrial purposes with several other putative class action lawsuits,
including Digwamaje v. Bank of America, No. 02-CV-6218 (RCC) (S.D.N.Y.), which had been previously filed in the United States District Court for the Southern District of
New York. The Digwamaje plaintiffs originally named DaimlerChrysler AG as a defendant, but later voluntarily dismissed DaimlerChrysler from the suit. Khulumani and Ntsebeza allege, in essence, that
the defendants knew about or participated in human rights violations and other abuses of the South African apartheid regime, cooperated with the apartheid government during that period, and benefited
financially from such cooperation. Plaintiffs' legal theories include conspiracy, aiding and abetting violations of international law, unjust enrichment, and unfair and discriminatory labor practices.
The plaintiffs seek, among other things, declaratory relief, compensatory and punitive damages, attorneys' fees and costs, the disgorgement of purported illicit profits, an accounting, restitution of
the value of defendants' purported unjust enrichment, a constructive trust, and the establishment of an "independent historic commission". They do not quantify damages. On July 14, 2003, a
group of defendants named in one or more of
the consolidated lawsuits, including Khulumani and Ntsebeza, filed a motion to dismiss the complaints. The motion was argued on November 6, 2003 and is currently pending before the Court. We
intend to continue to defend ourselves vigorously in these suits.

Litigation
is subject to many uncertainties, and we cannot predict the outcome of individual matters with assurance. It is reasonably possible that the final resolution of some of these
matters could require us to make expenditures, in excess of established reserves, over an extended period of time and in a range of amounts that we cannot reasonably estimate. Although the final
resolution of any such matters could have a material effect on our consolidated operating results for a particular reporting period, we believe that it should not materially affect our consolidated
financial position.

Dividend Policy

Our supervisory board and our board of management propose dividends based on the earnings shown in the year-end unconsolidated financial statements of
DaimlerChrysler AG, prepared under German generally accepted accounting principles pursuant to the German Commercial Code. The two boards then submit their proposal for approval at the annual general
meeting of shareholders, which we generally hold during the second quarter of the following year. Shareholders of record on the date of the annual general meeting at which we declare a dividend are
entitled to receive the dividend, less any amounts required to be withheld on account of taxes or other governmental charges. We generally pay dividends each year and expect to continue to do so in
the near future. We may not, however, pay dividends in the future at rates we have paid in previous years. Our payment of future dividends will depend upon our earnings, our financial condition,
including our cash needs, our future earnings prospects and other factors. For a discussion of our 2003 operating results, please refer to "Item 5. Operating and Financial Review and Prospects." For
additional information on dividends and exchange rates please refer to "Item 3. Key Information" and "Item 10. Additional Information."

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Item 9. The Offer and Listing.

Trading Markets

The principal trading markets for our ordinary shares are the Frankfurt Stock Exchange and the New York Stock Exchange. Our ordinary shares are also listed on the
German stock exchanges in Berlin, Bremen,
Düsseldorf, Hamburg, Hanover, Munich and Stuttgart, in the United States on the Chicago, Pacific, and Philadelphia stock exchanges, on the stock exchanges in Paris and Tokyo, and on the
Swiss stock exchange. Our ordinary shares trade under the symbol "DCX."

As
of December 31, 2003, our ordinary shares represented approximately 7.18% of the Deutsche Aktienindex (DAX), the leading index of trading on the Frankfurt Stock Exchange. Our
shares also represented 1.31% of the Dow Jones STOXX 50SM, which covers stocks from eight European equity markets, and 2.20% of the Dow Jones EURO STOXX 50SM, which covers
stocks from the equity markets of those member states of the European Union that adopted the euro as their common legal currency. The transfer agents for our ordinary shares are Deutsche Bank AG in
Germany and The Bank of New York in the United States.

Trading on the Frankfurt Stock Exchange

Deutsche Börse AG is the legal entity operating the Frankfurt Stock Exchange. The Frankfurt Stock Exchange is the most significant of the eight
German stock exchanges and accounts for the vast majority of the turnover in exchange-traded shares in Germany. As of December 31, 2003, equity securities of 5,730 companies traded on the
Frankfurt Stock Exchange, of which 4,901 were non-German.

Trading
on the floor of the Frankfurt Stock Exchange commences each business day at 9:00 a.m. and continues until 8:00 p.m., Central European Time. Markets in listed
securities are generally of the auction type, but listed securities also change hands in inter-bank dealer markets both on and off the stock exchange. Price formation on the floor is by
open outcry as determined by state appointed specialists (Amtliche Kursmakler) who are exchange members. These specialists do not, as a rule, deal with
the general public. The exchange quotes prices for active stocks, including those of larger companies, continuously during stock exchange hours. For all other stocks, a fixed price is determined by
auction around mid-session of each trading day. Transactions settle on the second business day following the day of their trade.

Our
ordinary shares trade on the floor of the Frankfurt Stock Exchange and also on Xetra, which stands for Exchange Electronic Trading. Xetra is an integrated electronic exchange system
operated by Deutsche Börse AG. The system may be used by brokers and banks admitted to Xetra by the Frankfurt Stock Exchange. Securities traded in this system include liquid stocks,
warrants, and bonds traded on the floor of the Frankfurt Stock Exchange. Xetra is an integral part of the Frankfurt Stock Exchange and is subject to its rules and regulations. In 2003, Xetra accounted
for approximately 96% of the trading volume of our ordinary shares at the Frankfurt Stock Exchange. Deutsche Börse shortened the trading hours for Xetra as of November 3, 2003.
Trading now takes place from 9.00 a.m. to 5.30 p.m. Central European Time (CET) instead of 9.00 a.m. to 8.00 p.m. CET. The shorter trading hours for Xetra will initially be
in effect for one year. After six months, Deutsche Börse will review its decision to determine whether the shorter trading hours should be continued.

The
Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht) monitors all trading
activities on the German stock exchanges. All orders from customers to buy or sell listed securities must be executed on a stock exchange unless a customer gives specific instructions to the contrary.

The
table below shows, for the periods indicated, the Xetra high and low sales prices for our ordinary shares from 1999. The table also shows, for the periods indicated, the Xetra highs
and lows of the DAX. The DAX is a continuously updated, capital-weighted performance index of the 30 largest German companies that are part of the prime standard. Since January 1, 2003, the
German securities markets consist of only two segments, the general standard and the prime standard. The prime standard is the premium category of the two segments and requires its participants to
meet additional criteria and to follow more stringent disclosure and reporting requirements. We have been included in the DAX since the merger of Daimler-Benz and

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Chrysler
in November 1998 and, effective January 1, 2003, became a member of the prime standard. A German stock corporation must be listed in the prime standard segment in order to be
eligible for inclusion in the German indices, such as the DAX. Adjustments of the DAX are made for capital changes, subscription rights and dividends. For additional information regarding rates of
exchange between the U.S. dollar and the euro, please refer to "Exchange Rate Information" in "Item 3. Key Information."

|                         |                                      | Price Per
DaimlerChrysler Ordinary Share |       | DAX  
|------------------------ | ------------------------------------ | ---------------------------------------- | ----- | -----
|
|
|Annual highs and lows    |                                      |                                          |       |      
|1999                     |                                      | 95.79                                    |       | 63.26
|2000                     |                                      | 79.97                                    |       | 42.70
|2001                     |                                      | 58.19                                    |       | 27.24
|2002                     |                                      | 55.44                                    |       | 28.16
|2003                     |                                      | 37.58                                    |       | 23.71
|Quarterly highs and lows |                                      |                                          |       |      
|2002                     |                                      |                                          |       |      
|                         | First Quarter                        |                                          | 54.47 |      
|                         | Second Quarter                       |                                          | 55.44 |      
|                         | Third Quarter                        |                                          | 49.38 |      
|                         | Fourth Quarter                       |                                          | 40.45 |      
|2003                     |                                      |                                          |       |      
|                         | First Quarter                        |                                          | 31.95 |      
|                         | Second Quarter                       |                                          | 31.25 |      
|                         | Third Quarter                        |                                          | 37.55 |      
|                         | Fourth Quarter                       |                                          | 37.58 |      
|Monthly highs and lows   |                                      |                                          |       |      
|2003                     |                                      |                                          |       |      
|                         | July                                 |                                          | 32.72 |      
|                         | August                               |                                          | 35.45 |      
|                         | September                            |                                          | 37.55 |      
|                         | October                              |                                          | 32.90 |      
|                         | November                             |                                          | 33.30 |      
|                         | December                             |                                          | 37.58 |      
|2004                     |                                      |                                          |       |      
|                         | January                              |                                          | 39.57 |      
|                         | February (through February 13, 2004) |                                          | 38.54 |      

---

On
February 13, 2004, the closing sales price for our ordinary shares on Xetra was [EURO]36.62. This price was equivalent to $46.69 per ordinary share, translated at the noon buying rate
for euros on that date.

Based
on turnover statistics supplied by the Frankfurt Stock Exchange, the average daily volume of our ordinary shares traded on the exchange (including Xetra) in 2003 was
6.1 million. As of December 31, 2003, the market capitalization of our company on the Frankfurt Stock Exchange was [EURO]37.5 billion.

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Trading on the New York Stock Exchange

Official trading of our ordinary shares on the New York Stock Exchange commenced on November 17, 1998.

The
following table shows, for the periods indicated, the high and low sales prices per ordinary share as reported on the New York Stock Exchange Composite Tape.

Price Per
DaimlerChrysler
Ordinary ShareHigh

Low$

$Annual highs and lows1999

108.63

65.312000

78.69

37.752001

52.72

25.602002

50.88

29.782003

46.85

26.27Quarterly highs and lows2002First Quarter

48.12

35.33Second Quarter

50.88

42.66Third Quarter

48.31

32.94Fourth Quarter

38.72

29.782003First Quarter

33.14

26.27Second Quarter

35.25

28.55Third Quarter

40.61

33.67Fourth Quarter

46.85

34.61Monthly highs and lows2003July

37.12

33.67August

38.48

34.64September

40.61

34.56October

37.92

34.61November

38.55

36.46December

46.85

38.372004January

49.85

45.91February (through February 13, 2004)

47.94

45.79


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On February 13, 2004, the closing sales price for our ordinary shares on the New York Stock Exchange as reported on the NYSE Composite Tape was
$46.35.

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Item 10. Additional Information.

OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES

In connection with the transfer of most of our aerospace activities to EADS in July 2000, Dornier GmbH became an indirect subsidiary of EADS. Some of
Dornier's minority shareholders may at any time exchange their shares in Dornier for cash or for our ordinary shares or shares in our subsidiary DaimlerChrysler Luft-und Raumfahrt Holding
Aktiengesellschaft which previously held a majority interest in Dornier. One of the Dornier minority shareholders partially exercised this right in 2002 and asked to exchange some of his Dornier
shares. At October 21, 2003, the exchange transaction was completed for cash. Those Dornier shareholders who
previously exchanged some or all of their Dornier shares for shares of DaimlerChrysler Luft- und Raumfahrt Holding Aktiengesellschaft retain the right to exchange these new shares for cash
or for our ordinary shares and some of them have already partially exercised this right.

In
1996, our subsidiary Daimler-Benz Capital (Luxembourg) AG, now known as DaimlerChrysler Luxembourg Capital S.A., issued 41/8% bearer notes with accompanying
warrants due July 5, 2003. These notes bear a nominal amount of DM 1,000 ([EURO]511) per note. The warrants accompanying each note originally entitled the noteholder to receive 10.254 ordinary
shares of our predecessor, Daimler-Benz AG. These shares were to consist in part of shares already issued and in part of newly issued shares. Following the merger of
Daimler-Benz with Chrysler, these warrants changed into warrants for our ordinary shares pursuant to Section 23 of the German Transformation Act
(Umwandlungsgesetz), and the warrant accompanying each note entitled the noteholder to receive 10.30527 of our ordinary shares. The warrants expired on
June 18, 2003. Between January 1 and June 18, 2003, we issued 20,698 ordinary shares as a result of exercises of warrants. On July 5, 2003 we redeemed the remaining
outstanding amount of notes of DM 348,024,000 (approx. [EURO]178 million).

In
addition, members of our board of management hold options granted under the stock option plan approved by the shareholders of Daimler-Benz AG in 1996 and under the stock
option plan approved by the shareholders of DaimlerChrysler AG in 2000. Under the 2000 stock option plan, we granted options in 2000, 2001, 2002 and 2003. For additional information on shares and
options held by members of our supervisory board and our board of management please refer to "Item 6. Directors, Senior Management and Employees  Share Ownership."

MEMORANDUM AND ARTICLES OF ASSOCIATION

Organization and Register

DaimlerChrysler AG is a stock corporation organized in the Federal Republic of Germany under the German Stock Corporation Act
(Aktiengesetz). It is registered in the Commercial register (Handelsregister) maintained by the local
court in Stuttgart, Germany, under the entry number "HRB 19360."

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Corporate Governance

German stock corporations are principally governed by three separate bodies: the annual general meeting of shareholders, the supervisory board and the board of
management. Their roles are defined by German law and by the corporation's memorandum and articles of association (Satzung), and may be described
generally as follows:



Several
of our specific corporate governance provisions are summarized below.

Business Purposes

As stated in Section 1 of our articles of association, our business purpose is to engage, directly or indirectly, business in the fields of development,
production and sale of products and rendering of services, especially in the following lines of business:



Our
articles authorize us to take all actions that serve the attainment of our business purposes, except that we (DaimlerChrysler AG) are not permitted to carry out directly banking and
real property transactions that require a government license.

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Directors

Under German law, our supervisory board members and board of management members owe a duty of loyalty and care to our company. They must exercise the standard of
care of a prudent and diligent businessman and bear the burden of proving they did so if their actions are contested. Both boards must consider the company's interest, interests of our shareholders,
our workers and, to some extent, the common interest. Those who violate their duties may be held jointly and severally liable for any resulting damages, unless their actions were validly approved by
resolution at a shareholders' meeting. According to German law, our supervisory board or board of management members may not receive a loan from us unless approved by our supervisory board, and may
not vote on a matter that concerns ratification of his or her own acts or in which he or she has a material interest. Separate from the limitations on loans imposed by German law, the Sarbanes-Oxley
Act, which was enacted in the United States in July 2002 and which is also applicable to foreign private issuers such as us, now prohibits almost all loans to directors and executive officers.
This prohibition applies to members of our supervisory board and our board of management. The compensation of our supervisory board members is fixed in our articles of association. A change to our
articles requires the approval of our shareholders. At the present time, the terms of the members of our supervisory board are not staggered, except that the term of the employee representatives on
our supervisory board does not coincide with the term of our shareholder representatives. Supervisory Board members are elected for a maximum of five-year terms, although the annual
meeting may specify a shorter term of office for the members elected by the shareholders. For further information about our supervisory board and board of management, please refer to "Item 6.
Directors, Senior Management and Employees."

Ordinary Shares

Our capital stock consists solely of ordinary shares without par value (Stückaktien), which we
issue in registered form. Record holders of our ordinary shares are registered in our share register (Aktienregister). Deutsche Bank AG acts as our
transfer agent and registrar in Germany and various other countries and administers our share register on our behalf. Our transfer agent and registrar in the United States is The Bank of New York.

Following
is a summary of significant provisions under German law and our articles of association relating to our ordinary shares:



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Dividends

We declare and pay dividends on our ordinary shares once a year after approval by the annual general meeting of our shareholders. Our supervisory board and board
of management ratify the unconsolidated financial statements of DaimlerChrysler AG for each fiscal year and recommend a disposition of all unappropriated profits, including the amount of net profits
to be distributed as a dividend, to our shareholders
for approval at the meeting. Shareholders registered in the share register on the date of the meeting are entitled to receive the dividend. We pay dividends to shareholders in proportion to their
percentage ownership of our outstanding capital stock.

Our
articles of association, in accordance with the German Stock Corporation Act (Aktiengesetz), authorize our board of management, with
the approval of our supervisory board, to make an interim payment to shareholders with respect to the unappropriated profit of the prior financial year, if a preliminary closing of the financial
statements for that year shows a profit. The interim payment may not exceed 50% of the amount of the foreseeable unappropriated profit, after deducting any amounts required to be added to retained
earnings. Furthermore, the interim payment may not exceed 50% of the previous fiscal year's unappropriated profit.

Our
articles of association provide for issuing new shares from capital previously approved by the shareholders. Our articles further provide that such new shares may be entitled to the
entire per ordinary share annual dividend for the year in which they are issued.

Under
the transfer agent agreement in place with our U.S. transfer agent, shareholders registered in our share register with addresses in the United States may elect to receive dividends
in either euros or U.S. dollars. Unless instructed otherwise, our U.S. transfer agent will convert all cash dividends and other cash distributions it receives with respect to our ordinary shares
registered in the U.S. into U.S. dollars before payment to the shareholder. The U.S. transfer agent will reduce the amount distributed by any amounts we or the U.S. transfer agent are required to
withhold on account of taxes or other governmental charges.

Voting Rights

Each of our ordinary shares represents one vote. German law does not permit cumulative voting. Our articles of association provide that resolutions are passed at
shareholder meetings by a simple majority of votes cast, unless a higher vote is required by law. German law requires that the following matters, among others, be approved by the affirmative vote of
75% of the issued shares present at the shareholders' meeting at which the matter is proposed:



Shareholder Meetings

Our board of management, our supervisory board, or shareholders owning in the aggregate at least 5% of our issued shares may call a meeting of shareholders. There
is no minimum quorum requirement for shareholder meetings. At the annual general meeting we ask our shareholders to ratify the actions of our

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board
of management and supervisory board during the prior year and to approve the disposition of unappropriated profit and the independent auditor proposed by the audit committee. Our shareholders
also elect their representatives to our supervisory board at the annual general meeting for terms of up to five years.

If
a shareholder wants to participate and vote at any of our meetings, the shareholder must be registered in the share register on the meeting date and must also have notified us no
later than the third day before the meeting date that he or she wishes to attend the meeting. Instead of voting in person at the meeting, shareholders may vote their shares by proxy after having
conferred a power of attorney by signing and returning the proxy card mailed to them or via the Internet in advance of the meeting. We mail a meeting notice to our shareholders which includes a proxy
card, an agenda describing the items to be voted on at the meeting, and a short form of our annual report. As a foreign private issuer, we are not required to file a proxy statement under U.S.
securities law. The proxy voting process for our shareholders in North America is substantially similar to the process utilized by publicly held companies incorporated in the United States.

Amendments
to our articles of association and other items for the agenda may be proposed either by our supervisory board and board of management, or by a shareholder or group of
shareholders holding a minimum of either 5% of the issued shares or shares representing at least [EURO]500,000 of the company's capital stock.

Change in Control

Our articles do not contain any specific provisions that would have an effect of delaying, deferring or preventing a change in control or that would only apply in
the context of a merger, acquisition or corporate restructuring involving us or any of our subsidiaries. On January 1, 2002, the German Takeover Act (Wertpapiererwerbs-
und Übernahmegesetz) became effective. It requires, among other things, that a bidder seeking control of a company with its corporate seat in Germany and traded
on a European Union stock exchange must publish advance notice of a tender offer; submit a draft offer statement to the Federal Supervisory Authority for Securities
(Bundesanstalt für Finanzdienstleistungsaufsicht) for review; and obtain certification from a qualified financial institution that
adequate financing is in place to complete the offer. Once a bidder has acquired shares representing 30% of the voting power, it must make an offer for all remaining shares of the target. The Takeover
Act requires the board of management of the target to refrain from taking any measures that may frustrate the success of the takeover offer. However, the target board of management is permitted to
take any action which a prudent and diligent management of a company that is not the target of a takeover bid would also take. Moreover, the target board of management may search for other bidders
and, with the prior approval of the supervisory board, may take other defensive measures, provided that both boards act within their general authority under the German Stock Corporation Act
(Aktiengesetz). The board of management may also adopt specific defensive measures if the supervisory board has approved such measures and if the
measures were specifically authorized by the shareholders no later than 18 months in advance of a takeover bid by resolution of 75% of the votes cast.

Disclosure of Shareholdings

Our articles do not require shareholders to disclose their shareholdings. The German Securities Trading Act
(Wertpapierhandelsgesetz), however, requires holders of voting securities of a corporation whose shares are listed on a stock exchange to notify the
corporation of the number of shares they hold if that number reaches, exceeds or falls below specified thresholds. These thresholds are 5%, 10%, 25%, 50% and 75% of the corporation's outstanding
voting rights.

Basis of Potential Claims

Claims against members of our supervisory board or board of management may be asserted on behalf of DaimlerChrysler AG if the shareholders' meeting so resolves by
simple majority or upon request of shareholders holding in the aggregate at least 10% of the issued shares. The shareholders' meeting or a court of competent jurisdiction, upon request by shareholders
holding in the aggregate at least 10% (under special

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circumstances
5%) of the issued shares or shares representing at least [EURO]1,000,000 (under special circumstances [EURO]500,000) of our capital stock must then appoint a special representative to
pursue such a claim.

German Corporate Governance Code Declaration

We, like other publicly traded companies in Germany, are subject to the German Corporate Governance Code. The Code, which was issued in 2002, and amended in
May 2003, by a government appointed commission, recommends specific governance practices. The German Stock Corporation Act (Aktiengesetz)
requires a company's supervisory board and board of management to declare annually if the Code's recommendations have been and are being met by the company and if not, which recommendations have not
been or are not being applied. Our supervisory board and board of management issued a statement declaring that we comply with the Corporate Governance Code, subject to the exceptions identified in the
declaration. For shareholders and others who may wish to read the English translation of the declaration, we have filed it as an exhibit to this annual report and also made it available on our website
atwww.daimlerchrysler.com/corpgov_e.

EXCHANGE CONTROLS

The euro is a fully convertible currency. There are currently no legal restrictions in Germany on international capital movements and foreign exchange
transactions (except in limited embargo circumstances) that would prevent us from transferring capital or paying dividends or other payments to our shareholders who are non-residents of
Germany. There are, however, limited reporting requirements regarding transactions involving cross-border monetary transfers.

TAXATION

In this section we discuss the material United States federal income and German tax consequences to you if you:



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We have based our discussion on existing United States federal income and German tax law, including legislation, regulations, administrative rulings and court decisions, as in effect on
the date of this annual report. These tax laws are subject to change, possibly with retroactive effect. Our discussion does not address all aspects of United States federal income and German taxation
that may be relevant to you in light of your particular circumstances. For example, our discussion does not address tax consequences resulting from shares acquired pursuant to the exercise of an
employee stock option or shares otherwise received as compensation and it does not include tax consequences to shareholders who are subject to special treatment under United States federal income tax
laws (for example, financial institutions, insurance companies, tax-exempt organizations, broker-dealers and corporations that own 10% or more of our ordinary shares). The discussion also
does not address any aspects of state, local or non-United States tax law other than some aspects of German tax law.

We strongly urge you to consult your tax advisor as to the United States federal income and German tax consequences and any other tax consequences of holding our
ordinary shares. You should also discuss with your tax advisor any facts and circumstances that may be unique to you.

Withholding Tax on Dividends

German law requires German corporations, including DaimlerChrysler AG, to withhold German tax on dividends paid to non-resident stockholders at a
total rate of 21.1% (consisting of a 20% withholding tax and a 1.1% surcharge). You can obtain a partial refund of this 21.1% aggregate German withholding tax under the Income Tax Treaty.

Generally,
United States federal income tax law requires you to pay taxes on dividends you receive from a German corporation. You may be permitted to claim a foreign tax credit for
German income taxes that you paid on the dividend to the extent that you are not entitled to a refund for those taxes from the German tax authorities.

The
Income Tax Treaty reduces the German withholding tax rate from 21.1% to 15% of the gross amount of the dividend you receive from a German corporation. Therefore, you may apply for a
refund of German withholding tax in an amount equal to 6.1% of the gross amount of the dividend you received (21.1% aggregate German withholding tax rate minus 15% Income Tax Treaty withholding tax
rate).

Thus,
each $1,000 of gross dividend paid to you will be subject to a German withholding tax of $211, of which $61 may be refunded to you under the Income Tax Treaty. Assuming you receive
the $61 refund, you will receive in total $850 of cash for each $1,000 of gross dividend ($789 directly and $61 by way of refund). The United States federal income tax rules will treat you as if you
received a total dividend of $1,000, and you will have to include $1,000 in your gross income. You may also be entitled to a foreign tax credit, subject to applicable limitations of United States
federal income tax law.

You
must include DaimlerChrysler's euro-denominated dividends in your gross income in a dollar amount that is based on the exchange rate on the date you receive or are
treated as having received the dividends. If you convert these dividends into dollars on the date you receive or are treated as having received the dividends, you should not be required to recognize
foreign currency gain or loss on the dividend. You may, however, be required to recognize foreign currency gain or loss on your receipt of refunds of German withholding tax to the extent that
(A) the dollar value of the refund you received or were treated as having received differs from (B) the dollar equivalent of the refund on the date you received or were treated as having
received the underlying dividend. United States federal income tax rules treat any such foreign currency gain or loss as ordinary income or loss.

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Withholding Tax Refund Procedures



If you are a record holder of our ordinary shares who is registered in our share register, our U.S. transfer agent, The Bank of New York, will initially receive
your dividends and will then distribute them to you. The U.S. transfer agent will also assist you in obtaining the refund of German withholding tax under the Income Tax Treaty. These arrangements may
be amended or revoked at any time in the future.

The
U.S. transfer agent will prepare a German claim for refund on your behalf and file it electronically with the German tax authorities. In order for the U.S. transfer agent to file
this claim for refund, the U.S. transfer agent will prepare and mail to you, and request that you sign and return to the U.S. transfer agent:



The
U.S. transfer agent will attach this signed statement to the claim for refund of German withholding tax and file the claim with the German tax authorities. You should request certification (IRS
Form 6166) of your last filed United States federal income tax return from the IRS and have it ready for presentation to the U.S. transfer agent upon request. Under German tax audit procedures,
the German tax authorities may request the U.S. transfer agent to provide them with your certification (IRS Form 6166). If you do not provide the U.S. transfer agent with this certification
within a reasonable time, the German tax authorities will deny your refund of the German withholding taxes.

A
simplified refund procedure also applies to you if you hold your ordinary shares through a broker participating in the Depository Trust Company. Under this procedure, the Depository
Trust Company claims a refund of German withholding taxes on your behalf by certifying your U.S. taxpayer status to the German tax authorities. This certification is based on information that you
provide to your broker. Accordingly, if you hold your ordinary shares through a broker participating in the Depository Trust Company, you do not need to file refund claims through the U.S. transfer
agent.

The
German tax authorities will issue refunds denominated in euros. The German tax authorities will issue these refunds to the U.S. transfer agent or the Depository Trust Company, as the
case may be, which will convert the refunds to dollars and pay the dollar amounts to you or your broker. If the funds are remitted to your broker, your broker will in turn remit your refund amounts to
you.



If you are not eligible for the simplified refund procedures discussed above, you must submit a special claim for refund to the German tax authorities to request
your refund of German withholding tax. You have to include with your claim the original or a certified copy of the bank voucher that you received from the U.S. transfer agent. This voucher must show
the amount of tax that was withheld. You must submit your claim within four years from the end of the calendar year in which you received the dividend. You can obtain a form for your claim for refund
from the German tax authorities at the same address where you will have to file your claim, which is: Bundesamt für Finanzen, 53221 Bonn, Germany. Alternatively, you may obtain the form
from the Embassy of the Federal Republic of Germany at 4645 Reservoir Road, N.W., Washington, D.C. 20007-1998; alternatively, you can download the form from the following
website:http://www.bff-online.de/Steuer_Vordrucke/KSt_KapSt/AntragErstattungKapE_USA.pdf.

You
must also submit to the German tax authorities a certification (IRS Form 6166) of your last filed United States federal income tax return. You can obtain this certification
from the office of the Director of the Internal Revenue Service Center by filing a request for the certification with the Internal Revenue Service  Philadelphia Service Center, Foreign
Certification Request, P.O. Box 16347, Philadelphia, PA 19114-0447. You

122

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can
obtain additional information, including IRS Publication 686, which describes the procedures for obtaining this certification, from the Internal Revenue Service website at http://www.irs.gov/pub/irs-pdf/p686.pdf. You must make requests for certification in writing and include your name, social security number
or employer identification number, tax return form number, country requesting the certification, and you must identify the tax period for which you request certification. The Internal Revenue Service
will send the certification directly to the German tax authorities if you authorize the Internal Revenue Service to do so. This certification remains valid for three years, and you need only resubmit
it in a fourth year if you would like to apply for a refund after the initial three-year period ends.

Reduced United States Tax Rate for Certain Dividends

Under the Jobs and Growth Tax Relief Reconciliation Act of 2003, the maximum rate of United States federal income tax on qualified dividend income received by an
individual (and certain trusts and estates) is reduced to 15%. The reduced maximum rate applies to eligible dividends received after December 31, 2002 and before January 1, 2009.
Qualified dividend income generally includes dividends paid by United States corporations and qualified foreign corporations. A foreign corporation is a qualified foreign corporation for these
purposes if:



In
addition, to qualify for the reduced rate, the share of stock on which the dividend is paid must be held more than 60 days in the 120-day period beginning 60 days before
the ex-dividend date and the stockholder must not be under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially
similar or related property.

Special
rules for determining a taxpayer's foreign tax credit limitation shall apply in the case of qualified dividend income. Rules similar to those of Internal Revenue Code
section 904(b)(2)(B) concerning adjustments to the foreign tax credit limitation to reflect any capital gain rate differential shall also apply to any qualified dividend income.



For individual shareholders subject to United States federal income taxation on the 2003 DaimlerChrysler dividend paid on April 10, 2003, to shareholders
of record on April 9, 2003, DaimlerChrysler is considered a qualified foreign corporation under either condition above. To qualify for the reduced maximum tax rate on dividend income, a share
of stock must have been held more than 60 days during the period February 8, 2003 through June 7, 2003.

Form 1099-DIV
for 2003 will report the gross amount of DaimlerChrysler dividends in Box 1b (Qualified dividends). Nevertheless, shareholders are required to determine
whether they meet the necessary holding period requirements and to what extent they are eligible to claim a foreign tax credit with respect to the DaimlerChrysler dividend.

Taxation of Capital Gains

The Income Tax Treaty provides that the German capital gains tax does not apply to gains on the sale or other disposition of your DaimlerChrysler ordinary shares.

If
you sell or otherwise dispose of your DaimlerChrysler ordinary shares, you will recognize capital gain or loss for United States federal income tax purposes equal to the difference
between the amount realized and

123

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your
adjusted tax basis in those shares. If you are an individual and you have held the DaimlerChrysler ordinary shares more than 12 months, the capital gain will generally be subject to a
maximum United States federal income tax rate of 15%.

German Capital Tax (Vermögensteuer)

As a result of a judicial decision, the German capital tax (Vermögensteuer) is not imposed at the
present time. In addition, under the Income Tax Treaty you would not have to pay German capital tax (Vermögensteuer) even if it were
currently in effect.

Other German Taxes

There are no German transfer, stamp or other similar taxes that apply to you in connection with receiving, purchasing, holding or selling our ordinary shares.

DOCUMENTS ON DISPLAY

You may read and copy the reports and other information we file with the Securities and Exchange Commission, including this annual report and the exhibits
thereto, at the Commission's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511, and 233 Broadway, New York, New York 10274. You may also obtain copies of these materials by mail from the Public Reference Room of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. You may obtain information on the operation of the Commission's Public Reference Room by calling the Commission in the United States at
1-800-SEC-0330. You may also access our annual reports and some of the other information we file with or submit to the Commission electronically through the
Commission's website atwww.sec.gov. In addition, you may inspect material we file at the offices of the New York Stock Exchange at 20 Broad Street, New
York, New York 10005.

Item 11. Quantitative and Qualitative Disclosures About Market Risk.

The global nature of our businesses exposes us to market risks resulting from changes in foreign currency exchange rates and interest rates. Accordingly, changes
in foreign currency exchange rates and interest rates may adversely affect our operating results and financial condition. We seek to manage and control these market risks primarily through our regular
operating and financing activities, but, when we deem it appropriate, we use derivative financial instruments. We evaluate these market risks by monitoring changes in key economic indicators and
market information on an ongoing basis.

We
also hold investments in equity securities, but only to a minor extent. The corresponding market risk in 2003 was not, and is not currently, material to us. Thus, we are not
presenting the
value-at-risk figures for our remaining equity price risk. Please refer to Note 32 to our Consolidated Financial Statements for additional information. According to
international banking standards we do not include investments in equity securities, which we classify as long term investments in our equity price risk assessment. To a minor degree, we are also
exposed to market price risks associated with the purchase of some commodities. When we deem it necessary, we use derivative instruments to reduce this risk. The risk resulting from derivative
commodity instruments is not significant to us.

Any
market sensitive instruments, including equity and interest bearing securities, that our pension plans hold are not included in this quantitative or qualitative analysis. Please
refer to Note 25a to our Consolidated Financial Statements for additional information regarding our pension plans.

124

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As part of our risk management control systems we employ value-at-risk analyses as recommended by the Bank for International Settlements. In performing these
analyses we quantify our market risk exposure to changes in foreign currency exchange rates, interest rates and equity prices, on a continuous basis by predicting the potential maximum loss (or worst
loss) over a target time horizon within a given confidence interval. The value-at-risk calculations we employ:



When
we calculate the value-at-risk of our portfolio of financial instruments, we first compute the current fair value of these financial instruments. We then
determine the impact of relevant market risk factors, such as foreign currency exchange rates or interest rates, on our portfolio value, which means we quantify the sensitivity of our portfolio to
these factors. Based on expected volatilities and correlations of these market risk factors which we obtain from the RiskMetrics dataset, we compute potential changes of the portfolio
value by applying the variance-covariance approach. The variance-covariance approach is a statistical method used to quantify the joint impact of all relevant market risk factors on the portfolio
value. Through these calculations, and by assuming a 99% confidence level and a holding period of five days, we obtain our value-at-risk. The 99% confidence level and the
five-day holding period indicate that there is only a 1% historical statistical probability that the value-at-risk will be exceeded by losses within the next five
days.

In
accordance with the organizational standards of the international banking industry, we maintain our risk management control systems independent of our corporate treasury and with a
separate reporting line. Please also refer to Note 32 to our Consolidated Financial Statements for additional information regarding our exposure to these market risks and the various activities
and instruments we use to manage them.

EXCHANGE RATE RISK

Transaction Risk and Currency Risk Management

The global nature of our businesses exposes our operations and reported financial results and cash flows to the risks arising from fluctuations in the exchange
rates of the dollar, the euro, and other world currencies. Our businesses are exposed to transaction risk whenever we have revenues in a currency that is different from the currency in which we incur
the costs of generating those revenues. Once we convert the revenues into the currency in which we incur the costs, the revenues may be inadequate to cover the costs if the value of the currency in
which we generated the revenues declined in the interim relative to the currency in which we incurred the costs. This risk exposure primarily affects our Mercedes Car Group segment, which generates a
significant portion of its revenues in foreign currencies and incurs manufacturing costs primarily in euros. Our Commercial Vehicles segment is also subject to transaction risk; however, because of
its global production network only to a minor degree. Our Chrysler Group segment generates almost all its revenues and incurs most of its costs in dollars. Therefore, the transaction risk of this
segment is relatively low compared to that of the Mercedes Car Group segment. Our Other Activities segment was exposed to transaction risk primarily as a result of the dollar exposure of the aircraft
engine business which we conducted through MTU Aero Engines. On December 31, 2003, we sold our MTU Aero Engines business.

Cash
inflows and outflows of the business segments are offset if they are denominated in the same currency. This means that revenues generated in a particular currency balance out costs
in the same currency, even if the revenues arise from a different transaction than that in which we incur the costs. As a result, only the unmatched amounts are subject to transaction risk. Our
overall currency exposure is additionally reduced through the natural hedging potential arising from the mutual offsets of the Chrysler Group's euro exposure with the dollar exposure of our Mercedes
Car Group and Commercial Vehicles segments. To provide an additional natural hedge against any remaining transaction risk exposure, we attempt, where appropriate, to increase cash outflows in the same
currencies in which we have a net excess inflow. We do this primarily

125

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through
increased purchases of parts, raw materials or services in the currencies in which our revenues exceed our costs and by increasing local production in those countries that are primary markets
for our products.

In
order to mitigate the impact of currency exchange rate fluctuations, we continually assess our exposure to currency risks and we hedge a portion of those risks by using derivative
financial instruments. We manage our currency exposure and the use of currency derivatives through our currency committee. Prior to the disposition of our MTU Aero Engines business, our currency
committee consisted of two separate sub-groups - one for our vehicle businesses and one for our MTU Aero Engines
business. Each sub-group consisted of members of senior management from the respective business as well as managers from our corporate treasury and risk controlling departments. Since
January 1, 2004, our currency committee has consisted exclusively of those members who previously formed the sub-group responsible for our vehicle businesses.

Our
corporate treasury department assesses foreign currency exposures and carries out the currency committee's decisions concerning foreign currency hedging through transactions with
international financial institutions. Our risk controlling department regularly informs our board of management of the corporate treasury department's actions.

The
principal derivative financial instruments we use to cover foreign currency exposure are forward foreign exchange contracts and currency options. Our policy is to use a mixture of
these instruments depending on our view of market conditions. Please refer to Note 32 to our Consolidated Financial Statements for a description of how we account for derivative financial
instruments.

The
following table shows the period-end, high, low and average value-at-risk figures for our 2003 and 2002 portfolio of derivative financial
instruments used to hedge the underlying currency exposure. We have computed the average exposure based on an end-of-quarter basis.

|                   |  | 2003 |  | 2002
|------------------ |  | ---- |  | ----
|
|
|Exchange Rate Risk |  | 381  |  | 430 

---

The
average and period-end values-at-risk of our derivative financial instruments used to hedge exchange rate risk increased in 2003, primarily as a
result of higher foreign exchange rate volatilities and an increased foreign exchange derivatives' volume.

Effects of Currency Translation

Many of our subsidiaries are located outside the euro zone. Since our financial reporting currency is the euro, we translate the income statements of these
subsidiaries into euros so that we can include their financial results in our consolidated financial statements. Period-to-period changes in the average exchange rate for a
particular country's currency can significantly affect the translation of both revenues and operating income denominated in that currency into euros. Unlike the effect of exchange rate fluctuations on
transaction exposure, the exchange rate translation risk does not affect local currency cash flows.

We
have significant assets and liabilities outside the euro zone. These assets and liabilities are denominated in local currencies and reside primarily at our U.S. holding subsidiary,
DaimlerChrysler North America Holding Corporation, and at our financial services companies. When we convert net asset values into euros, currency fluctuations result in
period-to-period changes in those net asset values. Our equity position reflects these changes in net asset values, and we continually assess and evaluate the
long-term currency risk inherent in these investments. We generally do not hedge against this type of risk, except in specific circumstances.

126

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INTEREST RATE RISK

We hold a variety of interest rate sensitive assets and liabilities to manage the liquidity and cash needs of our day-to-day operations.
Additionally, a substantial volume of interest rate sensitive
assets and liabilities relates to the leasing and sales financing business operated by our subsidiary DaimlerChrysler Services. DaimlerChrysler Services enters into transactions with customers which
primarily result in fixed-rate receivables. Our general policy is to match funding in terms of maturities and interest rates. For a limited portion of the receivables portfolio, however,
the funding does not match in terms of maturities and interest rates. As a result, we are exposed to risks due to changes in interest rates.

We
coordinate funding activities of the industrial business and the financial services business at the Group level. We use interest rate derivative instruments, such as interest rate
swaps, forward rate agreements, swaptions, caps and floors, to achieve the desired interest rate maturities and asset/liability structures.

The
following table shows the period-end, high, low and average value-at-risk figures for our 2003 and 2002 portfolio of interest rate sensitive
financial instruments. We have computed the average exposure based on an end-of-quarter basis.

|                   |  | 2003 |  | 2002
|------------------ |  | ---- |  | ----
|
|
|Interest Rate Risk |  | 115  |  | 174 

---

In
2003, the average and period-end values-at-risk of our portfolio of interest rate sensitive financial instruments decreased, primarily due to less
volatile interest rates and a reduced mismatch in terms of interest rate maturities between both, the receivables from our leasing and sales financing business and the respective funding of that
business.

Item 12. Description of Securities Other than Equity Securities.

Not applicable.

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PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies.

None.

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.

None.

Item 15. Controls and Procedures.

Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in this report is recorded,
processed, summarized and reported on a timely basis. The chairman of our board of management and the member of the board of management responsible for Finance & Controlling, with the
assistance of other members of management, performed an evaluation of our disclosure controls and procedures as of December 31, 2003. Based on that evaluation, they concluded that our
disclosure controls and procedures were effective as of December 31, 2003, to achieve their intended objectives.

There
have not been any changes in our internal control over financial reporting during fiscal year 2003 that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.

Item 16A. Audit Committee Financial Expert.

Our supervisory board has determined that Mr. Bernhard Walter is an "audit committee financial expert."

Item 16B. Code of Ethics.

In July 2003 our supervisory board adopted our Code of Ethics, a code that applies to members of the board of management, including its chairman and the
responsible member for Finance & Controlling, and other senior officers, including the Chief Controller and the Chief Accounting Officer. This code is publicly available on our website at www.daimlerchrysler.com/corpgov_e.

Item 16C. Principal Accountant Fees and Services.

In the annual meeting held on April 9, 2003, our shareholders appointed KPMG Deutsche Treuhand-Gesellschaft AG
Wirtschaftsprüfungsgesellschaft (KPMG), Berlin and Frankfurt am Main, to serve as our independent auditors for the 2003 fiscal year. For additional information regarding the appointment
of our independent auditors please refer to "Item 6. Directors, Senior Management and Employees." KPMG billed the following fees to us for professional services in each of the last two fiscal years:

Year Ended December 31,2003

2002([EURO] in millions)Audit Fees

34.0

31.4Audit-Related Fees

7.2

13.0Tax Fees

6.2

6.2All Other Fees

2.7

0.2Total

50.1

50.8


---

"Audit Fees" are the aggregate fees billed by KPMG for the audit of our consolidated and annual financial statements, reviews of interim financial
statements and attestation services that are provided in connection

128

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with
statutory and regulatory filings or engagements. "Audit-Related Fees" are fees charged by KPMG for assurance and related services that are reasonably related to the performance of the audit or
review of our financial statements and are not reported under "Audit Fees." This category comprises fees billed for the audit of employee benefit plans and pension schemes, agreed-upon
procedure engagements and other attestation services subject to regulatory requirements, certifications of accounting-related internal controls, as well as advisory services associated with our
financial reporting. "Tax Fees" are fees for professional services rendered by KPMG for tax compliance, tax advice on actual or contemplated transactions, tax consulting associated with international
transfer prices, and expatriate employee tax services. Fees disclosed under the category "All Other Fees" are mainly related to our project "Internal Control over Financial Reporting" implementing the
requirements of Section 404 of Sarbanes-Oxley Act of 2002. This category also includes training and other immaterial support services.

Audit Committee's pre-approval policies and procedures

Our Audit Committee nominates and engages our independent auditors to audit our financial statements. See also the description under the heading "Supervisory
Board" in "Item 6. Directors, Senior management and Employees." In 2003 our Audit Committee also adopted a policy requiring management to obtain the Committee's approval before engaging our
independent auditors to provide any other audit or permitted non-audit services to us or our subsidiaries. Pursuant to this policy, which is designed to assure that such engagements do not
impair the independence of our auditors, the Audit Committee pre-approves annually a catalog of specific audit and non-audit services in the categories Audit Service,
Audit-Related Service, Tax Consulting Services, and Other Services that may be performed by our auditors. In addition, the Audit Committee limited the aggregate amount in fees our auditors may receive
during the 2003 fiscal year for non-audit services in certain categories.

Our
Chief Accounting Officer reviews all individual management requests to engage our auditors as a service provider in accordance with this catalog and, if the requested services are
permitted pursuant to the catalog, approves the request accordingly. We inform the Audit Committee about these approvals on a quarterly basis. Services that are not included in the catalog require
pre-approval by the Audit Committee's chairman on a case-by-case basis. The chairman of our Audit Committee is not permitted to approve any engagement of our
auditors if the services to be performed either fall into a category of services that are not permitted by applicable law or the services would be inconsistent with maintaining the auditors'
independence.

129

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PART III

Item 17. Financial Statements.

Not applicable.

Item 18. Financial Statements.

You can find our Consolidated Financial Statements and schedule on pages F-i, F-1 through F-90.

We
expect to file additional financial information regarding our equity investee European Aeronautic Defence and Space Company EADS N.V. (EADS) as an amendment to this annual report in
order to comply with Rule 3-09 of Regulation S-X. We expect to file such amendment no later than June 30, 2004. The amendment will be available through the
Securities and Exchange Commission's web site atwww.sec.govand DaimlerChrysler's web siteat
www.daimlerchrysler.comshortly after its filing with the Commission. We have included summarized financial information about EADS in Note 3 to our Consolidated
Financial Statements.

Item 19. Exhibits.

|     |  | We have filed the following documents as exhibits to this annual report:                                                                                                                                                                                                                                                                                                                                                                                        
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.1  |  | Memorandum and Articles of Association (Satzung) of DaimlerChrysler AG as amended to date.                                                                                                                                                                                                                                                                                                                                                                      
|2.1  |  | The total amount of long-term debt securities of DaimlerChrysler AG authorized under any instrument does not exceed 10% of the total assets of the Group on a consolidated basis. We hereby agree to furnish to the
Commission, upon its request, a copy of any instrument defining the rights of holders of long-term debt of DaimlerChrysler AG or of its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed.
|8.1  |  | Significant subsidiaries owned, directly or indirectly, by DaimlerChrysler AG as of December 31, 2003, as defined in Regulation S-X, §210.1-02(w): See "Significant Subsidiaries" in "Item 4. Information on
the Company."                                                                                                                                                                                                                                      
|12.1 |  | Certification of the Chairman of the Board of Management pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                             
|12.2 |  | Certification of the Member of the Board of Management responsible for Finance & Controlling pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                         
|13.1 |  | Certification pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                        
|14.1 |  | Independent Auditors' Consent of KPMG Deutsche Treuhand-Gesellschaft AG.                                                                                                                                                                                                                                                                                                                                                                                        
|99.1 |  | Declaration by the Board of Management and Supervisory Board of DaimlerChrysler AG pursuant to §161 of the Joint Stock Corporation Act (AktG) regarding the German Corporate Governance Code in effect as of May 21,
 2003.                                                                                                                                                                                                                                     
|99.2 |  | Letter from the German Secretary of Transport, Building and Housing to the members of the Toll Collect consortium, dated February 17, 2004.                                                                                                                                                                                                                                                                                                                     

130

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SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.

Date:
February 19, 2004

| |  | DAIMLERCHRYSLER AG
| |  | ------------------
| |  | By:               
| |  |                   
| |  | By:               
| |  |                   

131

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DAIMLERCHRYSLER AG  Index to Consolidated Financial Statements

|                                   |                                                                                                                 | Page
|---------------------------------- | --------------------------------------------------------------------------------------------------------------- | ----
|Independent Auditors' Report       |                                                                                                                 | F-1 
|Consolidated Financial Statements: |                                                                                                                 |     
|                                   | Consolidated Statements of Income (Loss) for the years ended December 31, 2003, 2002 and 2001                   |     
|                                   | Consolidated Balance Sheets at December 31, 2003 and 2002                                                       |     
|                                   | Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2003, 2002 and 2001 |     
|                                   | Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001                      |     
|                                   | Consolidated Fixed Assets Schedule for the year ended December 31, 2003                                         |     
|                                   | Notes to the Consolidated Financial Statements                                                                  |     

F-i

---



Independent Auditor`s Report

The
Supervisory Board
DaimlerChrysler AG:

We
have audited the accompanying consolidated balance sheets of DaimlerChrysler AG and subsidiaries ("DaimlerChrysler") as of December 31, 2003 and 2002, and the related
consolidated statements of income (loss), changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2003. These consolidated
financial statements are the responsibility of DaimlerChrysler's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We
conducted our audits in accordance with generally accepted auditing standards in the United States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of DaimlerChrysler as of December 31, 2003
and 2002, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2003, in conformity with generally accepted
accounting principles in the United States of America.

As
described in Note 1 to the consolidated financial statements, DaimlerChrysler changed its method of accounting for stock-based compensation in 2003. As described in Notes 1, 2
and 11 to the consolidated financial statements, DaimlerChrysler also adopted the required portions of FASB Interpretation No. 46 (revised
December 2003), "Consolidation of Variable Interest Entities  an interpretation of ARB No. 51," in 2003. As described in Note 11 to the consolidated financial
statements, DaimlerChrysler adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," in 2002.

KPMG
Deutsche Treuhand-Gesellschaft AG

Stuttgart,
Germany
February 18, 2004

F-1

---



DAIMLERCHRYSLER AG AND SUBSIDIARIES  Consolidated Statements of Income (Loss)

|                                                                                                                                             |                                                                                                                       |                                                        |  | Consolidated |         
|-------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------ |  | ------------ | --------
|
|
|                                                                                                                                             |                                                                                                                      
|Revenues                                                                                                                                     |                                                                                                                       | 34.                                                    |  | $            | 171,870 
|                                                                                                                                             |                                                                                                                      
|Cost of sales                                                                                                                                |                                                                                                                       | 5.                                                     |  |              | (138,474
|                                                                                                                                             |                                                                                                                      
|Gross margin                                                                                                                                 |                                                                                                                       |                                                        |  |              | 33,396  
|                                                                                                                                             |                                                                                                                      
|Selling, administrative and other expenses                                                                                                   |                                                                                                                       | 5.                                                     |  |              | (22,388 
|                                                                                                                                             |                                                                                                                      
|Research and development                                                                                                                     |                                                                                                                       |                                                        |  |              | (7,018  
|                                                                                                                                             |                                                                                                                      
|Other income (therein gain on issuance of related company stock of [EURO]24 in 2003)                                                         |                                                                                                                       | 6.                                                     |  |              | 899     
|                                                                                                                                             |                                                                                                                      
|Turnaround plan expenses  Chrysler Group                                                                                                    |                                                                                                                       | 7.                                                     |  |              | (591    
|                                                                                                                                             |                                                                                                                      
|Income (expense) before financial income                                                                                                     |                                                                                                                       |                                                        |  |              | 4,298   
|                                                                                                                                             |                                                                                                                      
|                                                                                                                                             | Impairment of investment in EADS                                                                                      |                                                        |  |              |         
|                                                                                                                                             |                                                                                                                      
|                                                                                                                                             | Other financial income (expense), net (therein gain on issuance of
    associated company stock of [EURO]747 in 2001) |                                                        |  |              |         
|                                                                                                                                             |                                                                                                                      
|Financial income (expense), net                                                                                                              |                                                                                                                       | 8.                                                     |  |              | (3,547  
|                                                                                                                                             |                                                                                                                      
|Income (loss) before income taxes                                                                                                            |                                                                                                                       |                                                        |  |              | 751     
|                                                                                                                                             |                                                                                                                      
|Income tax benefit (expense)                                                                                                                 |                                                                                                                       | 9.                                                     |  |              | (1,234  
|                                                                                                                                             |                                                                                                                      
|Minority interests                                                                                                                           |                                                                                                                       |                                                        |  |              | (44     
|                                                                                                                                             |                                                                                                                      
|Income (loss) from continuing operations                                                                                                     |                                                                                                                       |                                                        |  |              | (527    
|                                                                                                                                             |                                                                                                                      
|Income from discontinued operations, net of taxes                                                                                            |                                                                                                                       | 10.                                                    |  |              | 18      
|                                                                                                                                             |                                                                                                                      
|Income on disposal of discontinued operations, net of taxes                                                                                  |                                                                                                                       | 10.                                                    |  |              | 1,111   
|                                                                                                                                             |                                                                                                                      
|Cumulative effects of changes in accounting principles: transition adjustments resulting from adoption of FIN 46R and SFAS 142, net of taxes |                                                                                                                       | 11.                                                    |  |              | (38     
|                                                                                                                                             |                                                                                                                      
|Net income (loss)                                                                                                                            |                                                                                                                       |                                                        |  |              | 564     
|                                                                                                                                             |                                                                                                                      
|Earnings (loss) per share                                                                                                                    |                                                                                                                       | 35.                                                    |  |              |         
|                                                                                                                                             |                                                                                                                      
|Basic earnings (loss) per share                                                                                                              |                                                                                                                       |                                                        |  |              |         
|                                                                                                                                             |                                                                                                                      
|                                                                                                                                             |                                                                                                                       | Income (loss) from continuing operations               |  |              |         
|                                                                                                                                             |                                                                                                                      
|                                                                                                                                             |                                                                                                                       | Income from discontinued operations                    |  |              |         
|                                                                                                                                             |                                                                                                                      
|                                                                                                                                             |                                                                                                                       | Income on disposal of discontinued operations          |  |              |         
|                                                                                                                                             |                                                                                                                      
|                                                                                                                                             |                                                                                                                       | Cumulative effects of changes in accounting principles |  |              |         
|                                                                                                                                             |                                                                                                                      
|                                                                                                                                             | Net income (loss)                                                                                                     |                                                        |  |              |         
|                                                                                                                                             |                                                                                                                      
|Diluted earnings (loss) per share                                                                                                            |                                                                                                                       |                                                        |  |              |         
|                                                                                                                                             |                                                                                                                      
|                                                                                                                                             |                                                                                                                       | Income (loss) from continuing operations               |  |              |         
|                                                                                                                                             |                                                                                                                      
|                                                                                                                                             |                                                                                                                       | Income from discontinued operations                    |  |              |         
|                                                                                                                                             |                                                                                                                      
|                                                                                                                                             |                                                                                                                       | Income on disposal of discontinued operations          |  |              |         
|                                                                                                                                             |                                                                                                                      
|                                                                                                                                             |                                                                                                                       | Cumulative effects of changes in accounting principles |  |              |         
|                                                                                                                                             |                                                                                                                      
|                                                                                                                                             | Net income (loss)                                                                                                     |                                                        |  |              |         
|                                                                                                                                             |                                                                                                                      

The accompanying notes are an integral part of these Consolidated Financial Statements.

F-2

---

DAIMLERCHRYSLER AG AND SUBSIDIARIES
Consolidated Statements of Income (Loss)

|Industrial Business1 |   | Financial Services1 |   |              
|-------------------- | - | ------------------- | - | -------------
|
|
|                     |   |                     |   |              
|[EURO]122,397        |   | [EURO]131,668       |   | [EURO]133,533
|                     |   |                     |   |              
|(98,937              | ) | (106,443            | ) | (111,195     
|                     |   |                     |   |              
|23,460               |   | 25,225              |   | 22,338       
|                     |   |                     |   |              
|(16,374              | ) | (16,451             | ) | (16,660      
|                     |   |                     |   |              
|(5,571               | ) | (5,942              | ) | (5,848       
|                     |   |                     |   |              
|661                  |   | 709                 |   | 1,149        
|                     |   |                     |   |              
|(469                 | ) | (694                | ) | (3,064       
|                     |   |                     |   |              
|1,707                |   | 2,847               |   | (2,085       
|                     |   |                     |   |              
|(1,960               | ) |                    |   |             
|                     |   |                     |   |              
|(799                 | ) | 2,325               |   | 145          
|                     |   |                     |   |              
|(2,759               | ) | 2,325               |   | 145          
|                     |   |                     |   |              
|(1,052               | ) | 5,172               |   | (1,940       
|                     |   |                     |   |              
|(352                 | ) | (738                | ) | 815          
|                     |   |                     |   |              
|(30                  | ) | (12                 | ) | 44           
|                     |   |                     |   |              
|(1,434               | ) | 4,422               |   | (1,081       
|                     |   |                     |   |              
|14                   |   | 82                  |   | 101          
|                     |   |                     |   |              
|882                  |   |                    |   |             
|                     |   |                     |   |              
|(30                  | ) | (124                | ) |             
|                     |   |                     |   |              
|(568                 | ) | 4,380               |   | (980         
|                     |   |                     |   |              
|                     |   |                     |   |              
|                     |   |                     |   |              
|                     |   |                     |   |              
|                     |   |                     |   |              
|                    |   |                    |   |             
|                     |   |                     |   |              
|                    |   |                    |   |             
|                     |   |                     |   |              
|                    |   |                    |   |             
|                     |   |                     |   |              
|                    |   |                    |   |             
|                     |   |                     |   |              
|                    |   |                    |   |             
|                     |   |                     |   |              
|                     |   |                     |   |              
|                     |   |                     |   |              
|                    |   |                    |   |             
|                     |   |                     |   |              
|                    |   |                    |   |             
|                     |   |                     |   |              
|                    |   |                    |   |             
|                     |   |                     |   |              
|                    |   |                    |   |             
|                     |   |                     |   |              
|                    |   |                    |   |             
|                     |   |                     |   |              

1  Additional information about the Industrial Business and Financial Services is not required under U.S.
GAAP and is unaudited.

F-3

---



DAIMLERCHRYSLER AG AND SUBSIDIARIES  Consolidated Balance Sheets

|                                                                              |  |     |  | Consolidated |         | Industrial Business1 |               | Financial
Services1
|----------------------------------------------------------------------------- |  | --- |  | ------------ | ------- | -------------------- | ------------- | -------------------
|
|
|                                                                              |  |     |  |             
|Assets                                                                        |  |     |  |              |         |                      |               |                    
|                                                                              |  |     |  |             
|Goodwill                                                                      |  | 12. |  | $            | 2,288   |                      | [EURO]  1,816 |                    
|                                                                              |  |     |  |             
|Other intangible assets                                                       |  | 13. |  |              | 3,551   |                      | 2,819         |                    
|                                                                              |  |     |  |             
|Property, plant and equipment, net                                            |  | 14. |  |              | 41,466  |                      | 32,917        |                    
|                                                                              |  |     |  |             
|Investments and long-term financial assets                                    |  | 20. |  |              | 11,020  |                      | 8,748         |                    
|                                                                              |  |     |  |             
|Equipment on operating leases, net                                            |  | 15. |  |              | 30,717  |                      | 24,385        |                    
|                                                                              |  |     |  |             
|Fixed assets                                                                  |  |     |  |              | 89,042  |                      | 70,685        |                    
|                                                                              |  |     |  |             
|Inventories                                                                   |  | 16. |  |              | 18,830  |                      | 14,948        |                    
|                                                                              |  |     |  |             
|Trade receivables                                                             |  | 17. |  |              | 7,660   |                      | 6,081         |                    
|                                                                              |  |     |  |             
|Receivables from financial services                                           |  | 18. |  |              | 66,308  |                      | 52,638        |                    
|                                                                              |  |     |  |             
|Other receivables                                                             |  | 19. |  |              | 19,964  |                      | 15,848        |                    
|                                                                              |  |     |  |             
|Securities                                                                    |  | 20. |  |              | 4,117   |                      | 3,268         |                    
|                                                                              |  |     |  |             
|Cash and cash equivalents                                                     |  | 21. |  |              | 13,878  |                      | 11,017        |                    
|                                                                              |  |     |  |             
|Non-fixed assets                                                              |  |     |  |              | 130,757 |                      | 103,800       |                    
|                                                                              |  |     |  |             
|Deferred taxes                                                                |  | 9.  |  |              | 3,386   |                      | 2,688         |                    
|                                                                              |  |     |  |             
|Prepaid expenses                                                              |  | 22. |  |              | 1,379   |                      | 1,095         |                    
|                                                                              |  |     |  |             
|Total assets (thereof short-term 2003: [EURO]65,051; 2002: [EURO]65,100)      |  |     |  |              | 224,564 |                      | 178,268       |                    
|                                                                              |  |     |  |             
|Liabilities and stockholders' equity                                          |  |     |  |              |         |                      |               |                    
|                                                                              |  |     |  |             
|Capital stock                                                                 |  |     |  |              | 3,317   |                      | 2,633         |                    
|                                                                              |  |     |  |             
|Additional paid-in capital                                                    |  |     |  |              | 9,971   |                      | 7,915         |                    
|                                                                              |  |     |  |             
|Retained earnings                                                             |  |     |  |              | 36,638  |                      | 29,085        |                    
|                                                                              |  |     |  |             
|Accumulated other comprehensive income                                        |  |     |  |              | (6,490  | )                    | (5,152        | )                  
|                                                                              |  |     |  |             
|Treasury stock                                                                |  |     |  |              |        |                      |              |                    
|                                                                              |  |     |  |             
|Stockholders' equity                                                          |  | 23. |  |              | 43,436  |                      | 34,481        |                    
|                                                                              |  |     |  |             
|Minority interests                                                            |  |     |  |              | 592     |                      | 470           |                    
|                                                                              |  |     |  |             
|Accrued liabilities                                                           |  | 25. |  |              | 49,345  |                      | 39,172        |                    
|                                                                              |  |     |  |             
|Financial liabilities                                                         |  | 26. |  |              | 95,347  |                      | 75,690        |                    
|                                                                              |  |     |  |             
|Trade liabilities                                                             |  | 27. |  |              | 14,591  |                      | 11,583        |                    
|                                                                              |  |     |  |             
|Other liabilities                                                             |  | 28. |  |              | 11,091  |                      | 8,805         |                    
|                                                                              |  |     |  |             
|Liabilities                                                                   |  |     |  |              | 121,029 |                      | 96,078        |                    
|                                                                              |  |     |  |             
|Deferred taxes                                                                |  | 9.  |  |              | 3,447   |                      | 2,736         |                    
|                                                                              |  |     |  |             
|Deferred income                                                               |  | 29. |  |              | 6,715   |                      | 5,331         |                    
|                                                                              |  |     |  |             
|Total liabilities (thereof short-term 2003: [EURO]70,542; 2002: [EURO]72,673) |  |     |  |              | 181,128 |                      | 143,787       |                    
|                                                                              |  |     |  |             
|Total liabilities and stockholders' equity                                    |  |     |  |              | 224,564 |                      | 178,268       |                    
|                                                                              |  |     |  |             

1  Additional information about the Industrial Business and Financial Services is not required under U.S.
GAAP and is unaudited.

The accompanying notes are an integral part of these Consolidated Financial Statements.

F-4

---



DAIMLERCHRYSLER AG AND SUBSIDIARIES        Consolidated Statements of Changes in Stockholders' Equity

|                                            |  |       |  |       |   |        |   | Accumulated other
comprehensive income (loss) |   |      |   |       |  
|------------------------------------------- |  | ----- |  | ----- | - | ------ | - | --------------------------------------------- | - | ---- | - | ----- | -
|
|                                            | 
|Balance at January 1,
2001                  |  | 2,609 |  | 7,299 |   | 29,461 |   | 3,285                                         |   | 198  |   | (408  | )
|                                            | 
|Net loss                                    |  |      |  |      |   | (662   | ) |                                              |   |     |   |      |  
|Other comprehensive income (loss)           |  |      |  |      |   |       |   | 565                                           |   | (137 | ) | 71    |  
|                                            | 
|Total comprehensive loss                    |  |       |  |       |   |        |   |                                               |   |      |   |       |  
|                                            | 
|Stock based compensation                    |  |      |  | 20    |   |       |   |                                              |   |     |   |      |  
|Purchase of capital stock                   |  |      |  |      |   |       |   |                                              |   |     |   |      |  
|Re-issuance of treasury stock               |  |      |  |      |   |       |   |                                              |   |     |   |      |  
|Dividends                                   |  |      |  |      |   | (2,358 | ) |                                              |   |     |   |      |  
|                                            | 
|Balance at December 31, 2001                |  | 2,609 |  | 7,319 |   | 26,441 |   | 3,850                                         |   | 61   |   | (337  | )
|                                            | 
|Net income                                  |  |      |  |      |   | 4,718  |   |                                              |   |     |   |      |  
|Other comprehensive income (loss)           |  |      |  |      |   |       |   | (3,238                                        | ) | (135 | ) | 1,402 |  
|                                            | 
|Total comprehensive loss                    |  |       |  |       |   |        |   |                                               |   |      |   |       |  
|                                            | 
|Stock based compensation                    |  |      |  | 57    |   |       |   |                                              |   |     |   |      |  
|Issuance of shares upon conversion of notes |  | 24    |  | 482   |   |       |   |                                              |   |     |   |      |  
|Purchase of capital stock                   |  |      |  |      |   |       |   |                                              |   |     |   |      |  
|Re-issuance of treasury stock               |  |      |  |      |   |       |   |                                              |   |     |   |      |  
|Dividends                                   |  |      |  |      |   | (1,003 | ) |                                              |   |     |   |      |  
|Other                                       |  |      |  | (39   | ) |       |   |                                              |   |     |   |      |  
|                                            | 
|Balance at December 31, 2002                |  | 2,633 |  | 7,819 |   | 30,156 |   | 612                                           |   | (74  | ) | 1,065 |  
|                                            | 
|Net income                                  |  |      |  |      |   | 448    |   |                                              |   |     |   |      |  
|Other comprehensive income (loss)           |  |      |  |      |   |       |   | (1,561                                        | ) | 407  |   | 1,162 |  
|                                            | 
|Total comprehensive income                  |  |       |  |       |   |        |   |                                               |   |      |   |       |  
|                                            | 
|Stock based compensation                    |  |      |  | 95    |   |       |   |                                              |   |     |   |      |  
|Issuance of shares upon conversion of notes |  |      |  | 1     |   |       |   |                                              |   |     |   |      |  
|Purchase of capital stock                   |  |      |  |      |   |       |   |                                              |   |     |   |      |  
|Re-issuance of treasury stock               |  |      |  |      |   |       |   |                                              |   |     |   |      |  
|Dividends                                   |  |      |  |      |   | (1,519 | ) |                                              |   |     |   |      |  
|                                            | 
|Balance at December 31, 2003                |  | 2,633 |  | 7,915 |   | 29,085 |   | (949                                          | ) | 333  |   | 2,227 |  
|                                            | 

The accompanying notes are an integral part of these Consolidated Financial Statements.

F-5

---



DAIMLERCHRYSLER AG AND SUBSIDIARIES        Consolidated Statements of Cash Flows

ConsolidatedYear ended December 31,(in millions)

2003
(Note 1)

2003

2002

2001Net income (loss)

$
564

[EURO]448

[EURO]4,718

[EURO](662
)Income (loss) applicable to minority interests


44

35

14

(44
)Cumulative effects of changes in accounting principles


38

30

159

Gains on disposals of businesses


(1,204
)
(956
)
(2,645
)
(768
)Impairment of investment in EADS


2,469

1,960



Depreciation and amortization of equipment on operating leases


7,028

5,579

7,244

7,254Depreciation and amortization of fixed assets


7,354

5,838

6,379

7,022Change in deferred taxes


811

644

268

(1,058
)Equity (income) loss from associated companies


678

538

16

(97
)Change in financial instruments


202

160

214

(409
)(Gains) losses on disposals of fixed assets/securities


(534
)
(424
)
(595
)
(600
)Change in trading securities


89

71

257

(4
)Change in accrued liabilities


1,279

1,015

3,312

2,825Turnaround plan expenses  Chrysler Group


591

469

694

3,064Turnaround plan payments  Chrysler Group


(351
)
(279
)
(512
)
(365
)Changes in other operating assets and liabilities: Inventories, net


(369
)
(293
)
6

(725
) Trade receivables


(556
)
(441
)
(305
)
620 Trade liabilities


1,362

1,081

(266
)
(1,298
) Other assets and liabilities


1,285

1,021

(942
)
729CASH PROVIDED BY OPERATING ACTIVITIES


20,780

16,496

18,016

15,484Purchases of fixed assets: Increase in equipment on operating leases


(19,656
)
(15,604
)
(17,704
)
(17,951
) Purchases of property, plant and equipment


(8,332
)
(6,614
)
(7,145
)
(8,896
) Purchases of other fixed assets


(382
)
(303
)
(315
)
(655
)Proceeds from disposals of equipment on operating leases


15,055

11,951

15,112

11,042Proceeds from disposals of fixed assets


810

643

878

1,043Payments for investments in businesses


(1,286
)
(1,021
)
(560
)
(821
)Proceeds from disposals of businesses


1,523

1,209

5,686

1,680Additions to receivables from financial services


(135,943
)
(107,917
)
(123,379
)
(130,863
)Repayments of receivables from financial services: Finance receivables collected


59,391

47,147

56,083

53,251 Proceeds from sales of finance receivables


68,975

54,755

58,247

76,662Acquisitions of securities (other than trading)


(6,519
)
(5,175
)
(5,305
)
(2,151
)Proceeds from sales of securities (other than trading)


6,028

4,785

5,376

3,531Change in other cash


(169
)
(134
)
80

142CASH USED FOR INVESTING ACTIVITIES


(20,505
)
(16,278
)
(12,946
)
(13,986
)Change in commercial paper borrowings and short-term financial liabilities


163

129

2,678

(11,971
)Additions to long-term financial liabilities


20,704

16,436

9,964

26,582Repayment of financial liabilities


(15,769
)
(12,518
)
(17,117
)
(10,394
)Dividends paid (including profit transferred from subsidiaries)


(1,936
)
(1,537
)
(1,015
)
(2,367
)Proceeds from issuance of capital stock (including minority interests)


55

44

49

75Purchase of treasury stock


(45
)
(36
)
(49
)
(66
)CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES


3,172

2,518

(5,490
)
1,859Effect of foreign exchange rate changes on cash and cash equivalents (maturing within 3 months)


(1,347
)
(1,069
)
(1,195
)
276NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (MATURING WITHIN 3 MONTHS)


2,100

1,667

(1,615
)
3,633CASH AND CASH EQUIVALENTS (MATURING WITHIN 3 MONTHS)AT BEGINNING OF PERIOD


11,463

9,100

10,715

7,082AT END OF PERIOD


13,563

10,767

9,100

10,715


The accompanying notes are an integral part of these Consolidated Financial Statements.

F-6

---

Industrial Business1

Financial Services1Year ended December 31,

Year ended December 31,2003

2002

2001

2003

2002

2001

(in millions)[EURO](568
)
[EURO]4,380

[EURO](980
)
[EURO]1,016

[EURO]338

[EURO]318

Net income (loss)30

11

(46
)
5

3

2

Income (loss) applicable to minority interests30

124





35



Cumulative effects of changes in accounting principles(956
)
(2,645
)
(762
)




(6
)
Gains on disposals of businesses1,960











Impairment of investment in EADS609

544

290

4,970

6,700

6,964

Depreciation and amortization of equipment on operating leases5,735

6,257

6,917

103

122

105

Depreciation and amortization of fixed assets194

(498
)
(1,595
)
450

766

537

Change in deferred taxes539

(78
)
(90
)
(1
)
94

(7
)
Equity (income) loss from associated companies141

205

(365
)
19

9

(44
)
Change in financial instruments(424
)
(599
)
(600
)


4



(Gains) losses on disposals of fixed assets/securities82

312

3

(11
)
(55
)
(7
)
Change in trading securities1,098

3,292

2,472

(83
)
20

353

Change in accrued liabilities469

694

3,064







Turnaround plan expenses  Chrysler Group(279
)
(512
)
(365
)






Turnaround plan payments  Chrysler GroupChanges in other operating assets and liabilities:(502
)
172

(549
)
209

(166
)
(176
)
 Inventories, net(500
)
(314
)
540

59

9

80

 Trade receivables1,082

(97
)
(1,291
)
(1
)
(169
)
(7
)
 Trade liabilities715

(2,187
)
(1,444
)
306

1,245

2,173

 Other assets and liabilities9,455

9,061

5,199

7,041

8,955

10,285

CASH PROVIDED BY OPERATING ACTIVITIESPurchases of fixed assets:(3,973
)
(4,842
)
(3,617
)
(11,631
)
(12,862
)
(14,334
)
 Increase in equipment on operating leases(6,539
)
(7,052
)
(8,785
)
(75
)
(93
)
(111
)
 Purchases of property, plant and equipment(250
)
(250
)
(564
)
(53
)
(65
)
(91
)
 Purchases of other fixed assets4,577

4,974

3,951

7,374

10,138

7,091

Proceeds from disposals of equipment on operating leases606

828

991

37

50

52

Proceeds from disposals of fixed assets(967
)
(532
)
(801
)
(54
)
(28
)
(20
)
Payments for investments in businesses1,179

5,168

1,456

30

518

224

Proceeds from disposals of businesses

232

207

(107,917
)
(123,611
)
(131,070
)
Additions to receivables from financial servicesRepayments of receivables from financial services:





47,147

56,083

53,251

 Finance receivables collected





54,755

58,247

76,662

 Proceeds from sales of finance receivables(4,963
)
(5,250
)
(1,931
)
(212
)
(55
)
(220
)
Acquisitions of securities (other than trading)4,687

5,283

2,381

98

93

1,150

Proceeds from sales of securities (other than trading)(207
)
(191
)
267

73

271

(125
)
Change in other cash(5,850
)
(1,632
)
(6,445
)
(10,428
)
(11,314
)
(7,541
)
CASH USED FOR INVESTING ACTIVITIES(1,392
)
971

1,724

1,521

1,707

(13,695
)
Change in commercial paper borrowings and short-term financial liabilities5,469

1,910

3,100

10,967

8,054

23,482

Additions to long-term financial liabilities(4,229
)
(7,696
)
(347
)
(8,289
)
(9,421
)
(10,047
)
Repayment of financial liabilities(908
)
(434
)
(2,356
)
(629
)
(581
)
(11
)
Dividends paid (including profit transferred from subsidiaries)(220
)
(227
)
(88
)
264

276

163

Proceeds from issuance of capital stock (including minority interests)(36
)
(49
)
(66
)






Purchase of treasury stock(1,316
)
(5,525
)
1,967

3,834

35

(108
)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES(981
)
(1,087
)
223

(88
)
(108
)
53

Effect of foreign exchange rate changes on cash and cash equivalents (maturing within 3 months)1,308

817

944

359

(2,432
)
2,689

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (MATURING WITHIN 3 MONTHS)CASH AND CASH EQUIVALENTS (MATURING WITHIN 3 MONTHS)8,161

7,344

6,400

939

3,371

682

AT BEGINNING OF PERIOD9,469

8,161

7,344

1,298

939

3,371

AT END OF PERIOD


1  Additional
information about the Industrial Business and Financial Services is not required under U.S. GAAP and is unaudited.

F-7

---



DAIMLERCHRYSLER AG AND SUBSIDIARIES        Consolidated Fixed Assets Schedule

Acquisition or Manufacturing Costs(in millions of [EURO])

Balance at
January 1,
2003

Currency
change

Change in
consolidated
companies

Additions

Reclassi-
fications

Disposals

Balance at
December 31,
2003Goodwill

3,498

(470
)
4

46

(1
)
20

3,057Other intangible assets

3,489

(528
)
(21
)
662

15

104

3,513Intangible assets

6,987

(998
)
(17
)
708

14

124

6,570Land, leasehold improvements and buildings including buildings on land owned by others

19,358

(1,409
)
5

376

545

174

18,701Technical equipment and machinery

33,820

(3,494
)
214

1,321

1,575

1,569

31,867Other equipment, factory and office equipment

22,380

(2,378
)
(158
)
1,012

1,732

1,511

21,077Advance payments relating to plant and equipment and construction in progress

5,666

(728
)
(28
)
3,965

(3,859
)
70

4,946Property, plant and equipment

81,224

(8,009
)
33

6,674

(7
)
3,324

76,591Investments in affiliated companies

1,221

(56
)
(296
)
220

4

73

1,020Loans to affiliated companies

94



(2
)
52



90

54Investments in associated companies

6,339

(159
)
41

905

46

1,190

5,982Investments in related companies

1,258

(17
)
(34
)
296

(50
)
105

1,348Loans to associated and related companies

296

(25
)
(6
)
71



54

282Long-term securities

197

4

1

151





353Other loans

298

(4
)
(1
)
180



227

246Investments and long-term financial assets

9,703

(257
)
(297
)
1,875



1,739

9,285Equipment on operating leases

38,090

(4,247
)
40

15,604

(7
)
17,032

32,448


The consolidated fixed assets schedule is part of the Notes to the Consolidated Financial Statements.

F-8

---

Depreciation/Amortization

Book Value1Balance at
January
1, 2003

Currency
change

Change in
consoli-
dated
companies

Additions

Reclassi-
fications

Disposals

Balance at
December
31, 2003

Balance at
December
31, 2003

Balance at
December
31, 2002

(in millions of [EURO])1,427

(187
)
4

1



4

1,241

1,816

2,071

Goodwill634

(59
)
(14
)
178

7

52

694

2,819

2,855

Other intangible assets2,061

(246
)
(10
)
179

7

56

1,935

4,635

4,926

Intangible assets8,830

(509
)
31

684

(14
)
91

8,931

9,770

10,528

Land, leasehold improvements and buildings including buildings on land owned by others21,729

(1,891
)
(163
)
2,647

(32
)
1,565

20,725

11,142

12,091

Technical equipment and machinery14,282

(1,364
)
(144
)
2,510

44

1,391

13,937

7,140

8,098

Other equipment, factory and office equipment114

(19
)




(5
)
9

81

4,865

5,552

Advance payments relating to plant and equipment and construction in progress44,955

(3,783
)
(276
)
5,841

(7
)
3,056

43,674

32,917

36,269

Property, plant and equipment139

(2
)
31

43



9

202

818

1,082

Investments in affiliated companies7



1







8

46

87

Loans to affiliated companies













5,982

6,339

Investments in associated companies244

(1
)


1



16

228

1,120

1,014

Investments in related companies13



1

22





36

246

283

Loans to associated and related companies













353

197

Long-term securities9

(1
)


55





63

183

289

Other loans412

(4
)
33

121



25

537

8,748

9,291

Investments and long-term financial assets9,847

(1,066
)


5,579



6,297

8,063

24,385

28,243

Equipment on operating leases


1  Currency translation changes with period end rates.

F-9

---



DAIMLERCHRYSLER AG AND SUBSIDIARIES        Notes to Consolidated Financial Statements

BASIS OF PRESENTATION

1. Summary of Significant Accounting Policies

General The consolidated financial statements of DaimlerChrysler AG and subsidiaries
("DaimlerChrysler" or the "Group") have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). All amounts herein are presented in
euros ("[EURO]") and, for the year 2003 amounts, also in U.S. dollars ("$"), the latter being unaudited and presented solely for the convenience of the reader at the rate of [EURO]1 = $1.2597,
the Noon Buying Rate of the Federal Reserve Bank of New York on December 31, 2003.

Certain
amounts reported in previous years have been reclassified to conform to the 2003 presentation and to reflect presentation requirements with respect to discontinued operations
(see Note 10).

Commercial
practices with respect to certain products manufactured by DaimlerChrysler necessitate that sales financing, including leasing alternatives, be made available to the Group's
customers. Accordingly, the Group's consolidated financial statements are also significantly influenced by activities of its financial services business. To enhance the readers' understanding of the
Group's consolidated financial statements, the accompanying financial statements present, in addition to the audited consolidated financial statements, unaudited information with respect to the
financial position, results of operations and cash flows of the Group's industrial and financial services business activities. Such information, however, is not required by U.S. GAAP and is not
intended to, and does not represent the separate U.S. GAAP financial position, results of operations
or cash flows of the Group's industrial or financial services business activities. Transactions between the Group's industrial and financial services business activities principally represent
intercompany sales of products, intercompany borrowings and related interest, and other support under special vehicle financing programs. The effects of transactions between the industrial and
financial services businesses have been eliminated within the industrial business columns.

Use of Estimates Preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates
and assumptions related to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported
amounts of revenues and expenses for the period. Significant items related to such estimates and assumptions include recoverability of investments in equipment on operating leases, collectibility of
sales financing and finance lease receivables, realizability of investments in associated companies, warranty obligations, sales incentive obligations, valuation of derivative instruments, and assets
and obligations related to employee benefits. Actual amounts could differ from those estimates.

DaimlerChrysler's
financial position, results of operations, and cash flows are subject to numerous risks and uncertainties. Factors that could affect DaimlerChrysler's future financial
statements and cause actual results to vary materially from expectations include, but are not limited to, further adverse changes in global economic conditions; overcapacity and intense competition in
the automotive industry; the concentrations of DaimlerChrysler's revenues derived from the United States and Western Europe; the significant portion of DaimlerChrysler's workforce subject to
collective bargaining agreements; fluctuations in currency exchange rates and interest rates; significant legal proceedings and environmental and other government regulations.

Principles of Consolidation The accompanying consolidated financial statements include the financial statements of
DaimlerChrysler AG and all of its material, majority-owned subsidiaries and certain variable interest entities, to the extent required at December 31, 2003, for which DaimlerChrysler is
determined to be the primary beneficiary (see section "New Accounting Standards" and Note 2).

All
significant intercompany transactions and balances relating to these majority-owned subsidiaries and variable interest entities have been eliminated.

F-10

---

Investments in Associated Companies Significant equity investments in which DaimlerChrysler does not
have a controlling financial interest, but has the ability to exercise significant influence over the
operating and financial policies of the investee ("associated companies"), such as the European Aeronautic Defence and Space Company EADS N.V. ("EADS"), Mitsubishi Motors Corporation ("MMC"), or
Mitsubishi Fuso Truck and Bus Corporation ("MFTBC") are accounted for using the equity method. Because the financial statements of EADS, MMC and MFTBC are not made available timely to DaimlerChrysler
in order to apply the equity method of accounting, the Group's proportionate share of the results of operations of these associated companies are included in DaimlerChrysler's consolidated financial
statements on a three month lag.

The
excess of DaimlerChrysler's initial investment in equity method companies over the Group's ownership percentage in the underlying net assets of those companies is attributed to
certain fair value adjustments with the remaining portion recognized as goodwill ("investor level goodwill"). Through December 31, 2001, prior to the adoption of Statement of Financial
Accounting Standards ("SFAS") 142, "Goodwill and Other Intangible Assets," investor level goodwill was being amortized on a straight-line basis over 20 years. Subsequent to the
adoption of SFAS 142, such investor level goodwill is not being amortized.

A
decline in fair value of any investment in an associated company below cost that is deemed to be other than temporary results in a reduction in carrying amount to fair value. The
impairment is charged to earnings and a new cost basis for the investment is established.

Foreign Currencies The assets and liabilities of foreign operations where the functional currency is not the euro are
generally translated into euro using period-end exchange rates. The resulting translation adjustments are recorded as a component of accumulated other comprehensive income (loss). The
statements of income (loss) and the statements of cash flows are translated using average exchange rates during the respective periods.

The
assets and liabilities of foreign operations in highly inflationary economies are translated into euro on the basis of period-end rates for monetary assets and
liabilities and at historical rates for non-monetary items, with resulting translation gains and losses recognized in earnings. Further, for foreign operations in such economies,
depreciation and gains and losses from the disposal of non-monetary assets are determined using historical rates.

Revenue Recognition Revenue for sales of vehicles, service parts and other related products is recognized when persuasive
evidence of an arrangement exists, delivery has occurred or services have been rendered, the price of the transaction is fixed and determinable, and collectibility is reasonably assured. Revenues are
recognized net of discounts, cash sales incentives, customer bonuses and rebates granted. Non-cash sales incentives that do not reduce the transaction price to the customer are classified
within cost of sales. Shipping and handling costs are recorded as cost of sales in the period incurred.

DaimlerChrysler
uses price discounts (primarily at the Chrysler Group) to adjust market pricing in response to a number of market and product factors, including: pricing actions and
incentives offered by competitors, economic conditions, the amount of excess industry production capacity, the intensity of market competition, and consumer demand for the product. The Group may offer
a variety of sales incentive programs at any point
in time, including: cash offers to dealers and consumers, lease subsidies which reduce the consumer's monthly lease payment, or reduced financing rate programs offered to consumers.

The
Group records as a reduction to revenue at the time of sale to the dealer the estimated impact of sales incentives programs offered to dealers and consumers. This estimated impact
represents the incentive programs offered to dealers and consumers as well as the expected modifications to these programs in order for the dealers to sell their inventory. The accrued liability for
sales incentives is based on the estimated cost of the sales incentive programs and the number of vehicles held in dealers' inventory. The majority of vehicles held in dealers' inventory are sold to
consumers within the next quarter and the sales incentives accrued liability is adjusted to reflect actual experience.

F-11

---

When
below market rate loans under special financing programs are used to promote sales of vehicles and the Services segment finances the vehicle, the effect of the rate differential at
the contract origination date is recorded as unearned income in the consolidated balance sheet. Services amortizes the unearned income balance into earnings using the interest method over the original
(contractual) life of the receivables. Upon prepayment or sale of the receivable, the unamortized unearned income is recognized into earnings.

Sales
under which the Group guarantees the minimum resale value of the product principally result in accounting for the transaction as an operating lease with the related revenues and
costs deferred at the time of title passage. Revenue from operating leases is recognized on a straight-line basis over the lease term. Revenue on long-term contracts is
generally recognized under the percentage-of-completion method based upon contractual milestones or performance.

Revenue
from sales financing and finance lease receivables is recognized using the interest method. Recognition of revenue is generally suspended when a finance or lease receivable
becomes contractually delinquent for periods ranging from 60 to 120 days.

The
Group offers extended, separately priced warranty contracts for certain products. Revenues from these contracts are deferred and recognized into income over the contract period in
proportion to the costs expected to be incurred based on historical information. In circumstances in which there is insufficient historical information, income from extended warranty contracts is
recognized on a straight-line basis. A loss on these contracts is recognized in the period, if the sum of expected costs for services under the contract exceeds unearned revenue.

The
Group sells significant amounts of finance receivables as asset-backed securities through securitization transactions. The Group sells a portfolio of receivables to a
non-consolidated trust and usually
remains as servicer for a servicing fee. Servicing fees are recognized on a consistent yield basis over the remaining term of the related receivables sold. In a subordinated capacity, the Group
retains residual cash flows, a beneficial interest in principal balances of receivables sold and certain cash deposits provided as credit enhancements for investors. Gains and losses from the sale of
finance receivables are recognized in the period in which the sale occurs. In determining the gain or loss for each qualifying sale of finance receivables, the investment in the receivable pool sold
is allocated between the portion sold and the portion retained based upon their relative fair values.

Estimated Credit Losses DaimlerChrysler determines its allowance for credit losses based on an ongoing systematic review and
evaluation performed as part of the credit-risk evaluation process. The evaluation performed considers historical loss experience, the size and composition of the portfolios, current
economic events and conditions, the estimated fair value and adequacy of collateral and other pertinent factors. Certain homogeneous loan portfolios are evaluated collectively, taking into
consideration primarily historical loss experience adjusted for the estimated impact of current economic events and conditions, including fluctuations in the fair value and adequacy of collateral.
Other receivables, such as wholesale receivables and loans to large commercial borrowers, are evaluated for impairment individually based on the fair value of collateral. Credit exposures deemed to be
uncollectible are charged against the allowance for doubtful accounts.

Valuation of Retained Interests in Sold Receivables DaimlerChrysler retains residual beneficial interests in certain pools
of sold and securitized retail and wholesale finance receivables. Such retained interests represent the present value of the estimated residual cash flows after repayment of all senior interests in
the sold receivables. The Group determines the value of its retained interests using discounted cash flow modeling upon the sale of receivables and at the end of each quarter. The valuation
methodology considers historical and projected principal and interest collections on the sold receivables, expected future credit losses arising from the collection of the sold receivables, and
estimated repayment of principal and interest on notes issued to third parties and secured by the sold receivables.

F-12

---

The
Group recognizes unrealized gains or losses attributable to the change in the fair value of the retained interests, which are recorded in a manner similar to
available-for-sale securities, net of related income taxes as a component of accumulated other comprehensive income (loss) until realized. The Group is not aware of an active
market for the purchase or sale of retained interests, and accordingly, determines the estimated fair value of the retained interests by discounting the estimated cash flow releases (the
cash-out method) using a discount rate that is commensurate with the risks involved. In determining the fair value of the retained interests, the Group estimates the future rates of
prepayments, net credit losses and forward yield curves. These estimates are developed by evaluating the historical experience of comparable receivables and the specific characteristics of the
receivables sold, and forward yield curves based on trends in the economy. An impairment adjustment to the carrying value of the retained interests is recognized in the period a decline in the
estimated cash flows below the cash flows inherent in the cost basis of an individual retained interest (the pool-by-pool method) is considered to be other than temporary.
Other than temporary impairment adjustments are generally recorded as a reduction of revenue.

Product Warranties A liability for the expected warranty-related costs is established when the product is sold, upon lease
inception, or when a new warranty program is initiated. Estimates for accrued warranty costs are primarily based on historical experience. Because portions of the products sold and warranted by the
Group contain parts manufactured (and warranted) by suppliers, the amount of warranty costs accrued also contains an estimate of recoveries from suppliers.

Research and Development and Advertising Research and development and advertising costs are expensed as incurred.

Sales of Newly Issued Subsidiary Stock Gains and losses resulting from the issuance of stock by a Group subsidiary to third
parties that reduce DaimlerChrysler's percentage ownership ("dilution gains and losses") are recognized in the Group's consolidated statement of income (loss) in the line items "Other income" for
gains and "Selling, administrative and other expenses" for losses. DaimlerChrysler also recognizes its share of any dilution gains and losses reported by its investees accounted for under the equity
method in the Group's consolidated statement of income (loss) in the line item "Financial income (expense) net."

Discontinued Operations The results of operations of discontinued Group components and gains or losses from their disposal
are each presented separately net of tax in the Group's statement of income (loss) before extraordinary income (loss) and the cumulative effect of changes in accounting principles for all periods
presented. A Group component is considered a discontinued operation if its operations and cash flows have been or will be eliminated from the ongoing activities of the Group as a result of the
disposal transaction, the Group will not have any significant subsequent continuing involvement with the component, and the component can be clearly distinguished, operationally and for financial
reporting purposes. If not disposed of by the balance sheet date, to qualify as discontinued operations, a component must also meet the conditions to be classified as held for sale. Results of
discontinued operations are recognized in the period in which they occur.

Pension and Other Postretirement Plans The measurement of pension and postretirement benefit liabilities is based upon the
projected unit credit method in accordance with SFAS 87, "Employers' Accounting for Pensions," and SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions,"
respectively. As permitted under SFAS 87 and SFAS 106, changes in the amount of either the projected benefit obligation (for pension plans), the accumulated benefit obligation (for other
postretirement plans) or plan assets resulting from experience different from that assumed and from changes in assumptions can result in gains and losses not yet recognized in the Group's consolidated
financial statements. The expected return on plan assets is determined based on the expected long-term rate of return on plan assets and the fair value or market-related value of plan
assets. Amortization of an unrecognized net gain or loss is included as a component of the Group's net periodic benefit plan cost for a year if, as of the beginning of the year, that unrecognized net
gain or loss exceeds

F-13

---

10 percent
of the greater of (1) the projected benefit obligation (for pension plans) or the accumulated postretirement benefit obligation (for other postretirement plans) or
(2) the fair value or market-related value of that plan's assets. In such case, the amount of amortization recognized by the Group is the resulting excess divided by the average remaining
service period of active employees expected to receive benefits under the plan (see Note 25a).

Earnings Per Share Basic earnings per share is calculated by dividing income (loss) from continuing operations and net
income (loss), respectively, by the weighted average number of shares outstanding. Diluted earnings per share reflects the potential dilution that would occur if all securities and other contracts to
issue Ordinary Shares were exercised or converted (see Note 35).

Goodwill and Other Intangible Assets SFAS 141, "Business Combinations," requires that the purchase method of
accounting be used for all business combinations initiated after June 30, 2001. Goodwill represents the excess of the cost of an acquired entity over the fair values assigned to the assets
acquired and the liabilities assumed. SFAS 141 also specifies the types of acquired intangible assets that are required to be recognized and reported separately from goodwill and those acquired
intangible assets that are required to be included in goodwill.

As
a result of the adoption of SFAS 142 as of January 1, 2002, goodwill acquired and intangible assets determined to have an indefinite useful life are not amortized, but
instead are tested for impairment. Prior to the adoption of SFAS 142, goodwill was amortized on a straight-line basis over its estimated useful life of 3 to 40 years, and
assessed for recoverability based on estimated undiscounted future cash flows.

DaimlerChrysler
evaluates the recoverability of its goodwill at least annually or when significant events occur or there are changes in circumstances that indicate the fair value of a
reporting unit of the Group is less than its carrying value. The Group determines the fair value of each of its reporting units by estimating the present value of their future cash flows. In addition,
any recognized intangible asset determined to have an indefinite useful life is tested at least annually for impairment in accordance with SFAS 142 until its life is determined to no longer be
indefinite. SFAS 142 also requires that intangible assets with estimable useful lives be valued at acquisition cost, amortized over their respective estimated useful lives (2 to
10 years) to their estimated
residual values, and reviewed for impairment in accordance with SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."

In
connection with the transitional impairment evaluation, SFAS 142 required DaimlerChrysler to perform an assessment of whether there was an indication that goodwill was impaired
as of January 1, 2002. To accomplish this, DaimlerChrysler (1) identified its reporting units, (2) determined the carrying value of each reporting unit by assigning the assets and
liabilities, including the existing goodwill and intangible assets, to those reporting units, and (3) determined the fair value of each reporting unit. DaimlerChrysler completed this first step
of the transitional assessment for all of the Group's reporting units by June 30, 2002 and determined that there was no indication that goodwill had been impaired as of January 1, 2002.
Accordingly, no transitional goodwill impairment charge was necessary.

Companies
accounted for by DaimlerChrysler using the equity method, such as EADS and MMC, are also subject to the requirements of SFAS 141 and SFAS 142. DaimlerChrysler's
proportionate share of its equity method investees' (primarily EADS) transitional goodwill impairment charge resulting from the adoption of SFAS 142 was [EURO]159 million ([EURO]0.16 per
share). This transitional impairment charge and the related per share amount are reported as the cumulative effect of a change in accounting principles in the Group's consolidated statement of income
(loss) for the year ended December 31, 2002 (see Note 11).

Property, Plant and Equipment Property, plant and equipment is valued at acquisition or manufacturing costs less accumulated
depreciation. Plant and equipment under capital leases are stated at the lower of present

F-14

---

value
of minimum lease payments or fair value less accumulated amortization. Depreciation expense is recognized using either the declining balance method until the straight-line method
yields larger expenses or the straight-line method. For German Group companies, depreciation expense for property, plant and equipment placed in service before January 1, 2001, is
recognized using either the straight-line method or the declining balance method. Property, plant and equipment placed in service at these German Group companies after December 31,
2000, is depreciated using the straight-line method of depreciation. The costs of internally produced equipment and facilities include all direct costs and allocable manufacturing
overhead. Costs of the construction of certain long-term assets include capitalized interest, which is amortized over the estimated useful life of the related asset. Property, plant and
equipment are depreciated over the following useful lives: buildings 10 to 50 years; site improvements 5 to 40 years; technical equipment and machinery
3 to 30 years; and other equipment, factory and office equipment 2 to 33 years.

As
part of its Turnaround Plan objectives (see Note 7), the Chrysler Group has lengthened its platform life-cycles and is aggressively pursuing a strategy to use
manufacturing equipment for more than one product launch. The Chrysler Group performed an extensive engineering review of the assets utilized in its manufacturing facilities. These studies resulted in
revisions to the estimated remaining useful lives as well as a reduction in estimated salvage values of certain manufacturing machinery, equipment and tooling to
better represent the revised platform strategy and the increased use of flexible manufacturing techniques in its facilities. The change in these estimated useful lives and salvage values was applied
to existing assets and new additions beginning in 2002. The change in estimates resulted in reduced depreciation and amortization expenses of machinery, equipment and tooling of
[EURO]324 million ([EURO]206 million, net of taxes, or [EURO]0.20 per diluted share) for the year ended December 31, 2002.

Leasing Leasing includes all arrangements that transfer the right to use specified property, plant or equipment for a stated
period of time, even if the right to use such property, plant or equipment is not explicitly described in an arrangement. The Group is a lessee of property, plant and equipment and lessor of
equipment, principally passenger cars and commercial vehicles. All leases that meet certain specified criteria intended to represent situations where the substantive risks and rewards of ownership
have been transferred to the lessee are accounted for as capital leases. All other leases are accounted for as operating leases. Rent expenses on operating leases, where the Group is lessee, is
recognized over the respective lease terms using the straight-line method. Equipment on operating leases, where the Group is lessor, is carried initially at its acquisition or production
cost and is depreciated over the contractual term of the lease, using the straight-line method, to its estimated residual value. The estimated residual value is initially determined using
published third party information as well as projections based on historical experience about expected resale values for the types of equipment leased.

Impairment of Long-Lived Assets The Group adopted SFAS 144 on January 1, 2002. The adoption of
SFAS 144 did not have a significant effect on the Group's consolidated financial statements. In accordance with SFAS 144, long-lived assets held and used, such as property,
plant and equipment, and purchased intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or
group of assets may not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset or asset group to the estimated future undiscounted cash
flows expected to be generated by the asset or group of assets. If the carrying amount of an asset or group of assets exceeds its estimated future undiscounted cash flows, an impairment charge is
recognized in the Group's financial statements by the amount by which the carrying amount of the asset or group of assets exceeds fair value of the asset or group of assets.

Assets
to be disposed of are presented separately in the balance sheet (or disclosed in the notes) and reported at the lower of the carrying amount or fair value less costs to sell, and
are no longer depreciated. Assets and liabilities of a disposal group classified as held for sale are presented separately in the appropriate asset and liability sections of the balance sheet (or
disclosed in the notes).

F-15

---

Prior
to the adoption of SFAS 144, DaimlerChrysler accounted for long-lived assets in accordance with SFAS 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of."

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 portion of assets to be realized in excess of one year has been disclosed.

Inventories Inventories are valued at the lower of acquisition or manufacturing cost or market, cost being generally
determined on the basis of an average or first-in, first-out method ("FIFO"). Certain of the Group's U.S. inventories are valued using the last-in,
first-out method ("LIFO"). Manufacturing costs comprise direct material and labor and applicable manufacturing overheads, including depreciation charges.

Marketable Securities and Investments Securities and certain investments are accounted for at fair value, if it is readily
determinable. Unrealized gains and losses on trading securities, representing securities bought and held principally for the purpose of near term sales, are included in earnings. Unrealized gains and
losses on available-for-sale securities are included as a component of accumulated other comprehensive income (loss), net of applicable taxes, until realized. All other
securities and investments are recorded at cost. A decline in value of any available-for-sale security below cost that is deemed to be other than temporary results in a
deduction in carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established.

Cash Equivalents The Group's liquid assets are recorded under various balance sheet captions as more fully described in
Note 21. For purposes of the consolidated statements of cash flows, the Group considers all highly liquid instruments with original maturities of three months or less to be cash equivalents.

Derivative Instruments and Hedging Activities DaimlerChrysler uses derivative financial instruments such as forward
contracts, swaps, options, futures, swaptions, forward rate agreements, caps and floors for hedging purposes. The accounting of derivative instruments is based upon the provisions of SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities," as amended. On the date a derivative contract is entered into, DaimlerChrysler designates the derivative as either a hedge of the fair
value of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge), a hedge of a forecasted transaction or the variability of cash flows to be received or paid related
to a recognized asset or liability (cash flow hedge), or a hedge of a net investment in a foreign operation. DaimlerChrysler recognizes all derivative instruments as assets or liabilities on the
balance sheet and measures them at fair value, regardless of the purpose or intent for holding them. Changes in the fair value of derivative instruments are recognized periodically either in earnings
or stockholders' equity, as a component of accumulated other comprehensive income (loss), depending on whether the derivative is designated as a hedge of changes in fair value or cash flows. For
derivatives designated as fair value hedges, changes in fair value of the hedged item and the derivative are recognized currently in earnings. For derivatives designated as cash flow hedges, fair
value changes of the effective portion of the hedging instrument are recognized in accumulated other comprehensive income on the balance sheet, net of applicable taxes, until the hedged item is
recognized in earnings. The ineffective portions of the fair value changes are recognized in earnings immediately. Derivatives not meeting the criteria for hedge accounting are marked to market and
impact earnings. SFAS 133 also requires that certain derivative instruments embedded in host contracts be accounted for separately as derivatives.

Further
information on the Group's financial instruments is included in Note 32.

Commitments and Contingencies Liabilities for loss contingencies are recorded when it is probable that a liability has been
incurred and the amount can be reasonably estimated.

DaimlerChrysler
accrues for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable. Accruals for estimated losses from
environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study. Such accruals are adjusted as

F-16

---

further
information develops or circumstances change. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. Recoveries of environmental
remediation costs from other parties are recorded as assets when their receipt is deemed probable.

Deposits from Direct Banking Business Demand deposit accounts are classified as financial liabilities. Interest paid on
demand deposit accounts is recognized in cost of sales as incurred.

New Accounting Standards In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS 143,
"Accounting for Asset Retirement Obligations." SFAS 143 requires DaimlerChrysler to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a
legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development and/or the normal use of the asset. The Group also
records a corresponding asset that is depreciated over the life of the asset to be retired. Subsequent to the initial measurement of the asset retirement obligation, the liability is adjusted at the
end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation. The Group was required to adopt SFAS 143 on January 1, 2003.
The adoption of SFAS 143 did not have a significant impact on the Group's consolidated financial statements.

In
June 2002, the FASB issued SFAS 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS 146 addresses financial accounting and reporting for
costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity." The provisions of SFAS 146 were effective for exit or disposal activities initiated after December 31, 2002. The adoption of SFAS 146 did not have a significant impact
on the Group's consolidated financial statements.

In
November 2002, the Emerging Issues Task Force ("EITF") reached a final consensus on EITF 00-21, "Revenue Arrangements with Multiple Deliverables." The scope
provisions of EITF
00-21 were slightly modified in May 2003. EITF 00-21 addresses certain aspects for the accounting of revenue arrangements with multiple deliverables by a vendor. EITF
00-21 outlines an approach to determine when a revenue arrangement that contains multiple deliverables should be divided into separate units of accounting and, if separation is
appropriate, how the arrangement consideration should be allocated to the identified accounting units. EITF 00-21 became effective for DaimlerChrysler in its financial statements beginning
July 1, 2003, and DaimlerChrysler applied the consensus prospectively to all transactions occurring after June 30, 2003. The adoption of EITF 00-21 did not have a significant
impact on the Group's consolidated financial statements.

In
November 2002, the FASB issued Interpretation ("FIN") 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Othersan interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34." FIN 45 enhances the disclosures to be
made by a guarantor in its financial statements about its obligations under certain guarantees issued. FIN 45 also clarifies that a guarantor is required to recognize, at inception of a
guarantee, a liability for the fair value of the non-contingent portion of the obligation due to the issuance of the guarantee or, if higher, a probable loss under SFAS 5. The
initial recognition and measurement provisions of FIN 45 were applicable to guarantees issued or modified after December 31, 2002, without significant impact to the Group's consolidated
financial statements. The disclosures required by FIN 45 were effective for financial statements of interim and annual periods ending after December 15, 2002 (see Notes 25b and
31).

In
December 2002, the FASB issued SFAS 148, "Accounting for Stock-Based CompensationTransition and Disclosurean amendment of FASB Statement
No. 123." SFAS 148 amends SFAS 123, "Accounting for Stock-Based Compensation," to provide alternative methods of transition for a voluntary change to the fair value based method
of accounting for stock-based employee compensation. In addition, SFAS 148 requires disclosures in both interim and annual financial statements of the method of accounting used for stock-based
employee compensation and the effect of the method used on reported results (see Note 24 and table presented below).

F-17

---



During the second quarter of 2003, DaimlerChrysler adopted the fair value recognition provisions of SFAS 123 prospectively, as permitted by
SFAS 148, to all employee awards granted, modified, or settled after January 1, 2003. Compensation expense for all awards granted prospectively from December 31, 2002, will be
measured at the grant date based on the fair value of the equity award using a modified Black-Scholes option-pricing model. Compensation expense will be recognized over the employee service period
with an offsetting credit to equity (paid-in capital). DaimlerChrysler options granted prior to January 1, 2003, will continue to be accounted for using the intrinsic value based
approach under Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees," and related Interpretations. Compensation expense under APB 25 was measured at the
grant date based on the difference between the strike price of the equity award and the fair value of the underlying stock as of the date of grant. The adoption of the fair value based method for
awards granted in April 2003 resulted in additional compensation expense in the Group's statement of income (loss) of [EURO]37 million for 2003, ([EURO]23 million, net of taxes,
or [EURO]0.02 per share, respectively). The following table illustrates the effect on net income (loss) and earnings (loss) per share if the fair value based method had been applied to all outstanding
and unvested awards in each period.

Year ended December 31,(in millions of [EURO])

2003

2002

2001Net income (loss)

448

4,718

(662
)Add: Stock-based employee compensation expense included in reported net income, net of related tax effects

81

47

22Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects

(164
)
(161
)
(94
)Pro forma net income (loss)

365

4,604

(734
)Earnings (loss) per share (in [EURO]):Basic

0.44

4.68

(0.66
)Basic  pro forma

0.36

4.57

(0.73
)Diluted

0.44

4.67

(0.66
)Diluted  pro forma

0.36

4.54

(0.73
)


In
December 2003, the FASB issued FIN 46 (revised December 2003), "Consolidation of Variable Interest Entities" ("FIN 46R"), which addresses how a business enterprise
should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and accordingly should consolidate the entity. FIN 46R replaces FIN 46,
"Consolidation of Variable Interest Entities," which was issued in January 2003. DaimlerChrysler applied the unmodified provisions of FIN 46R to "special purpose entities" as of
December 31, 2003. DaimlerChrysler will apply FIN 46R to all entities that are not "special purpose entities" as of March 31, 2004.

See
Notes 2 and 3 for further information about the impact of FIN 46R on the Group's consolidated financial statements.

In
March 2003, the EITF reached consensuses on the remaining issues of EITF 02-9, "Accounting for Changes That Result in a Transferor Regaining Control of Financial
Assets Sold." EITF 02-9 requires the transferor to recognize at fair value financial assets previously sold when control over the financial assets is regained as if the transferor had
repurchased the assets, together with a corresponding liability to the transferee. Gain or loss recognition by the transferor is precluded if control is regained over assets sold. EITF
02-9 also applies to any beneficial interest or to qualifying special purpose entities that become non-qualifying. Servicing assets or

F-18

---

liabilities
and other retained interests continue to be accounted for separately. Loan loss allowances may not be recognized as of the repurchase date. EITF 02-9 is applicable for changes
occurring after April 2, 2003, that result in the transferor regaining control over financial assets previously sold. The application of EITF 02-9 did not have a material effect on
the Group's consolidated financial statements.

In
April 2003, the FASB issued SFAS 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." SFAS 149 amends and clarifies accounting for
derivative instruments and hedging activities under SFAS 133. SFAS 149 is generally effective for contracts entered into or modified after June 30, 2003. However, the provisions
of SFAS 149 that relate to Derivative Implementation Group Issues that have been effective for fiscal quarters that began prior to June 15, 2003, shall continue to be applied in
accordance with their respective effective dates. The adoption of SFAS 149 did not have a significant impact on the Group's consolidated financial statements.

In
May 2003, the FASB issued SFAS 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS 150 amends the
accounting and classification for certain financial instruments, such as those used in most stock buy-back programs that previously were accounted for and classified as equity.
SFAS 150 requires that certain types of freestanding financial instruments that have characteristics of both liabilities and equity be classified as liabilities with, in most cases, changes in
fair value flowing through the income statement. SFAS 150 could affect companies' ratios, performance measures and certain stock buy-back programs. DaimlerChrysler applied the
provisions of SFAS 150 immediately to all financial instruments entered into or modified after May 31, 2003, and otherwise to all existing financial instruments as of July 1,
2003. The adoption of SFAS 150 did not have a significant impact on the Group's consolidated financial statements.

In
May 2003, the EITF reached a consensus on EITF 01-8, "Determining Whether an Arrangement Contains a Lease." EITF 01-8 clarifies certain provisions of
SFAS 13, "Accounting for Leases," with respect to the identification of lease elements in arrangements that do not explicitly include lease provisions. Any lease element identified under EITF
01-8 should be accounted for under current lease accounting literature by lessors and lessees. DaimlerChrysler applied EITF 01-8 prospectively to arrangements newly agreed to,
modified, or acquired in a business combination beginning July 1, 2003. Initial adoption of EITF 01-8 did not have a significant impact on the Group's consolidated financial
statements.

In
November 2003, the EITF reached a partial consensus on EITF 03-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to
Certain Investments." EITF 03-1 addresses the meaning of other than temporary impairment and its application to investments classified as either available-for-sale
or held-to-maturity under SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities," and investments accounted for under the cost method or the equity
method. Although no consensus was reached on how to evaluate when an impairment of securities or investments is other than temporary, the EITF agreed on certain quantitative and qualitative
disclosures about unrealized losses pertaining to debt and equity securities classified as available-for-sale or held-to-maturity. The disclosures
required by EITF 03-1 are effective for fiscal years ending after December 15, 2003 (see Note 20).

In
December 2003, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position ("SOP") 03-3,
"Accounting for Certain Loans or Debt Securities Acquired in a Transfer." SOP 03-3 is applicable to loans and debt securities with characteristics of loans acquired in a transfer
(including business combinations) and limits recognition and display of the accretable yield to the excess of cash flows expected to be collected over the initial investment. The SOP prohibits
carrying over or creation of valuation allowances at initial recognition. Any subsequent increases in cash flows expected to be collected will be recognized prospectively. Any subsequent decreases
will be recognized as impairment. The provisions are effective for loans acquired in fiscal years beginning after December 15, 2004. Impairment

F-19

---

provisions
apply prospectively for loans existing at December 15, 2004, for fiscal subsequent years. DaimlerChrysler is currently determining the effect from application of SOP 03-3
on the Group's consolidated financial statements.

In
December 2003, the FASB issued SFAS 132 (revised 2003), "Employers' Disclosure about Pensions and Other Postretirement Benefits (revised 2003)an amendment
of FASB Statements No. 87, 88, and 106," which requires additional disclosures about the Group's defined benefit plan and other postretirement plan assets, obligations, net costs, and cash
flows. The Group has adopted the new disclosure requirements as of December 31, 2003 (see Note 25a).

2. Scope of Consolidation and Certain Variable Interest Entities

Scope of Consolidation DaimlerChrysler comprises 440 (2002: 451) German and non-German
subsidiaries as well as 3 companies (variable interest entities) that have been consolidated in accordance with the requirements of FIN 46R. A total of 100 (2002: 102) companies are accounted for in
the consolidated financial statements using the equity method of accounting. During 2003, 22 subsidiaries were included in the consolidated financial statements for the first time. A total of 33
subsidiaries were no longer included in the consolidated group. The effects of changes in the Group's consolidated balance sheets and the consolidated statements of income (loss) are explained further
in the notes to the consolidated financial statements. A total of 327 subsidiaries ("affiliated companies") are not consolidated as their combined
influence on the consolidated financial position, results of operations, and cash flows of the Group is not material (2002: 305). The effect of such non-consolidated subsidiaries for all
periods presented on consolidated assets, revenues and net income (loss) of DaimlerChrysler was approximately 1%. In addition, 3 (2002: 5) companies administering pension funds whose assets are
subject to restrictions have not been included in the consolidated financial statements. The consolidated financial statements include 71 associated companies (2002: 112) accounted for at cost and
recorded under investments in related companies, as these companies are not material to the respective presentation of the consolidated financial position, results of operations or cash flows of the
Group.

Variable Interest Entities As described in Note 1, DaimlerChrysler applied certain provisions of FIN 46R as of
December 31, 2003. The implementation of FIN 46R had the following impact on the Group's consolidated financial statements:

Consolidated Special Purpose Entities DaimlerChrysler identified several leasing arrangements that were
off-balance in the past and qualify as special purpose entities as defined in FIN 46R. DaimlerChrysler is the primary beneficiary of those structures and, accordingly, consolidated these
arrangements effective December 31, 2003. Under these arrangements, variable interest entities were established and owned by third parties. The variable interest entities raised funds by
issuing either debt or equity securities to third party investors. The variable interest entities used the debt and equity proceeds to purchase property and equipment, which is leased by the Group and
used in the normal course of business. At the end of the lease term, DaimlerChrysler generally has the option to purchase the property and equipment or re-lease the property and equipment
under new terms. Total assets and liabilities of those consolidated entities total [EURO]0.4 billion and [EURO]0.4 billion, respectively, as of December 31, 2003. The cumulative
effect of consolidating these special purpose entities on the Group's consolidated statement of income (loss) in 2003 was [EURO]30 million, net of taxes of [EURO]35 million (see
Note 11). The assets consist primarily of property, plant and equipment that generally serves as collateral for the entities' long-term borrowings. The creditors of these entities
do not have recourse to the general credit of the Group, except to the extent of guarantees provided.

Arrangements with Bank Conduits DaimlerChrysler sells automotive receivables to multi-seller and multi-collateralized bank
conduits, which are considered variable interest entities, in the ordinary course of business. A bank conduit generally receives substantially all of its funding from issuing asset-backed securities
that are

F-20

---

crosscollateralized
by the assets held by the entity. DaimlerChrysler generally remains as servicer. DaimlerChrysler also retains residual beneficial interests in the receivables sold, which are
designed to absorb substantially all of the credit, prepayment, and interest-rate risk of the receivables transferred to the conduits. Although its interest in these variable interest
entities is significant, DaimlerChrysler has concluded that it is not the primary beneficiary of these bank conduits and therefore is not required to consolidate them under FIN 46R. The outstanding
balance of receivables sold to conduits as of December 31, 2003, was approximately [EURO]4.4 billion. The corresponding retained interest balance as of December 31, 2003, was
approximately [EURO]0.8 billion, which represents the Group's maximum exposure to loss as a result of its involvement with these variable interest entities.

Other Significant Interests in Investments, Dealerships, and Executory Contracts Additionally, DaimlerChrysler has equity or
other interests in a number of other entities, including investments accounted for using the cost method, dealerships, suppliers, and service providers. While DaimlerChrysler holds significant
variable interests in those entities, it does not expect that, upon completing its analysis in the first quarter of 2004, it will conclude that it is the primary beneficiary. Total assets and
liabilities of these entities were [EURO]0.3 billion and [EURO]0.3 billion, respectively, as of December 31, 2003. DaimlerChrysler's maximum exposure to loss as a result of its
involvement with these companies was [EURO]0.2 billion as of December 31, 2003. Individual associated companies included in the Group's consolidated financial statements using the equity
method are also subject to the requirements of FIN 46R at the investee level. Because DaimlerChrysler accounts for its equity in the earnings and losses of certain associated companies such as EADS,
MMC, and MFTBC on a three-month lag, the initial impact, if any, of adoption of FIN 46R consolidation requirements for special purpose entities at the investee level for these associated companies
will be recognized as the cumulative effect of a change in accounting principle in the Group's consolidated statement of income for the three-month period ending March 31, 2004, and the initial
impact of the consolidation requirements for all other variable interest entities in the Group's consolidated statement of income for the three-month period ending June 30, 2004.

3. Significant Investments and Variable Interest Entities Accounted for Under the Equity Method

Equity Method Investments At December 31, 2003, the significant investments in companies
accounted for under the equity method were the following:

Company

Ownership
percentageEuropean Aeronautic Defence and Space Company EADS N.V.

33.0
%Mitsubishi Motors Corporation

37.0
%Mitsubishi Fuso Truck and Bus Corporation

43.0
%


Further
information with respect to the transactions which resulted in the Group's holdings in EADS, MMC and MFTBC is presented in Note 4 (Acquisitions and Dispositions),
Note 8 (Financial Income (expense), net) and Note 11 (Cumulative Effects of Changes in Accounting Principles).

The
market values at December 31, 2003, of DaimlerChrysler's investments in EADS and MMC, based on quoted market prices, were [EURO]5,027 million and
[EURO]889 million, respectively. Quoted market prices for MFTBC are not available because the shares in MFTBC are not publicly traded.

F-21

---

The
carrying amounts of DaimlerChrysler's investments in EADS, MMC and MFTBC at December 31, 2003 and 2002, are as follows:

At December 31,(in millions of [EURO])

2003

2002EADS

3,583

4,396MMC

959

1,316MFTBC1

831




---

As of September 30, 2003, DaimlerChrysler determined that the decline in market value below the carrying value of its investment in EADS
was other-than-temporary. Consequently, DaimlerChrysler reduced the then carrying value of its investment in EADS by [EURO]1.96 billion to its market value, based on the
quoted market price, which approximated [EURO]3.5 billion at September 30, 2003 (see Note 8).
The impairment charge is included in the Group's consolidated statement of income (loss) in the line item "Financial income (expense), net" in 2003. As a result of the impairment a new cost basis was
established.

The
carrying value of DaimlerChrysler's investments in MMC and MFTBC exceeded DaimlerChrysler's share of the underlying reported net assets of these investees by approximately
[EURO]546 million and [EURO]105 million, respectively, at December 31, 2003. DaimlerChrysler's share of the underlying reported net assets of EADS exceeded the carrying value of
DaimlerChrysler's investment at December 31, 2003, by approximately [EURO]1,899 million. These excess amounts are attributable to fair value adjustments at DaimlerChrysler pertaining to
certain assets and liabilities of these investee companies, with the remaining portion considered as investor level goodwill.

The
following tables present, on a three month lag, summarized U.S. GAAP financial information for EADS, MMC and MFTBC (amounts shown on a 100% basis in millions of [EURO]) which are the
basis for applying the equity method in the Group's consolidated financial statements:

F-22

---

EADS:

Income statement information1

2003

2002Revenues

27,650

28,769Net income

348

521


Balance sheet information2

2003

2002Fixed assets

27,305

26,254Non-fixed assets

24,804

19,207Total assets

52,109

45,461Stockholders' equity

16,611

13,143Minority interests

1,717

942Accrued liabilities

8,055

8,262Other liabilities

25,726

23,114Total liabilities and stockholders' equity

52,109

45,461


---

MMC:

Income statement information1

2003

2002Revenues

27,129

27,847Net loss

(759
)
(238
)


Balance sheet information2

2003

2002Fixed assets

7,287

10,465Non-fixed assets

10,237

11,971Total assets

17,524

22,436Stockholders' equity

1,116

1,422Minority interests

114

121Accrued liabilities

4,077

5,039Other liabilities

12,217

15,854Total liabilities and stockholders' equity

17,524

22,436


---

F-23

---

MFTBC1

Income statement information2

2003Revenues

4,948Net income

130


Balance sheet information3

2003Fixed assets

2,531Non-fixed assets

3,515Total assets

6,046Stockholders' equity

1,688Minority interests

13Accrued liabilities

1,215Other liabilities

3,130Total liabilities and stockholders' equity

6,046


---

DaimlerChrysler's equity in the earnings or losses of EADS, MMC and MFTBC, as well as investor-level adjustments such as
other-than-temporary impairment charges made by
DaimlerChrysler are included in the Group's consolidated statement of income (loss) in the line item "financial income (expense), net" (see Note 8) and are as follows:

(in millions of [EURO])

2003

2002

2001EADS

(1,845
)1
281
2
686
3MMC

(281
)
(88
)
(436
)MFTBC4

56






---

Variable Interest Entities Accounted for Under the Equity Method DaimlerChrysler
holds significant variable interests in a number of associated companies that are not special purpose entities but that could be "variable interest entities." If DaimlerChrysler determines that any of
these associated companies are variable interest entities and that it is the primary beneficiary of any of them, such entities will be required to be consolidated by the Group as of March 31,
2004 in accordance with FIN 46R. DaimlerChrysler specifically identified two variable interest entities for which the maximum exposure to loss is considered material from a Group
perspective  debis AirFinance ("dAF") and Toll Collect GmbH ("Toll Collect"). DaimlerChrysler has determined, that it is not the primary beneficiary of dAF or Toll Collect and
therefore DaimlerChrysler is not required to consolidate them.

F-24

---

In
November 1995, DaimlerChrysler assumed a 45% equity ownership interest in dAF, an Amsterdam registered Private Limited Liability Company that was established for purposes of
leasing aircraft and related technical equipment to airlines and financial intermediaries. Several banks hold the remaining ownership interests in dAF. dAF's consolidated total assets, financial
liabilities, total liabilities, and net shareholders' equity at December 31, 2003 were [EURO]2.6 billion, [EURO]1.8 billion, [EURO]2.5 billion and [EURO]0.1 billion,
respectively. dAF's consolidated revenues for the year ended December 31, 2003, were [EURO]0.3 billion. DaimlerChrysler's involvement with dAF consists primarily of its equity interest
and also subordinated loans receivable and unsecured loans that have been provided to dAF. DaimlerChrysler believes that its maximum exposure to loss as a result of its involvement with dAF is
primarily limited to the carrying value of its total investments (including loans) in dAF, which was [EURO]0.6 billion at December 31, 2003.

In
December 2002, DaimlerChrysler, Deutsche Telekom AG ("Deutsche Telekom"), and Compagnie Financiere et Industrielle des Autoroutes S.A. ("Cofiroute") (together the "Consortium")
entered into a partnership agreement to develop a system for the electronic collection of tolls and to establish a separate joint venture company to perform under a contract entered into in
September 2002 between the consortium and the Federal Republic of Germany to build up and operate a toll collection system for the use of German roadways by certain commercial vehicles.
DaimlerChrysler has a 45% equity ownership interest, Deutsche Telekom also holds a 45% equity ownership interest and Cofiroute holds the remaining 10% equity ownership interest in both the partnership
and the joint venture company (together "Toll Collect"). Toll Collect's total assets, financial liabilities and total liabilities at December 31, 2003, were [EURO]1.1 billion,
[EURO]0.5 billion and [EURO]1.1 billion, respectively. DaimlerChrysler's involvement with Toll Collect is comprised of its equity interest, receivables and certain guarantees. Due to the
risks associated with these guarantees, which are described in more detail in Note 31, DaimlerChrysler reduced its investment in Toll Collect to zero, and recorded an additional accrual of
[EURO]0.1 billion. DaimlerChrysler believes that its maximum exposure to loss as a result of its involvement with Toll Collect could exceed the current recognized obligation.

Furthermore,
DaimlerChrysler holds significant variable interests in a number of other associated companies, but determined that it is not the primary beneficiary of those entities.
Total assets and total liabilities of these entities amounted to [EURO]0.6 billion and [EURO]0.4 billion as of December 31, 2003, respectively. The maximum exposure to loss
arising from DaimlerChrysler's involvement with those entities totaled [EURO]0.3 billion.

F-25

---



4. Acquisitions and Dispositions

On December 31, 2003, as part of the Group's ongoing strategy to focus on its core automotive business, DaimlerChrysler sold its 100% equity interest in
MTU Aero Engines GmbH ("MTU Aero Engines") to Kohlberg, Kravis and Roberts & Co. Ltd. ("KKR"), an investment company. The purchase price for the operative business amounted to
[EURO]1,450 million. Excluding cash, cash equivalents and debts, which remain at MTU Aero Engines, the net sales price amounted to [EURO]1,052 million. Consideration received by
DaimlerChrysler included a note receivable from KKR and cash of [EURO]877 million. Also as a result of this transaction, DaimlerChrysler is obligated to pay a compensation of
$250 million to United Technologies Corporation, the parent company of Pratt & Whitney, in 2004. DaimlerChrysler realized an after-tax gain of [EURO]882 million from
this sale. The operating results and cash flows from MTU Aero Engines' business are included in DaimlerChrysler's consolidated financial statements through December 31, 2003. However the
operating results and gain are presented as discontinued operations in accordance with SFAS 144 (see Note 10). The following classes of assets and liabilities were part of this disposal
group in 2003: [EURO]366 million fixed assets, [EURO]805 million current assets, [EURO]378 million liabilities and [EURO]863 million accrued liabilities.

In
November 2003, as part of the Group's ongoing strategy to focus on its core automotive business, DaimlerChrysler sold a 60% interest in Mercedes-Benz Lenkungen
GmbH, its 100% interest in Mercedes-Benz Lenkungen U.S. LLC and its 100% interest in the steering activities of DaimlerChrysler do Brasil Ltda. to ThyssenKrupp Automotive AG
("ThyssenKrupp") for [EURO]42 million in cash. DaimlerChrysler's remaining 40% interest in Mercedes-Benz Lenkungen GmbH is subject to put and call options held by DaimlerChrysler
and ThyssenKrupp, respectively, of approximately [EURO]28 million. The sales resulted in an aggregate pretax gain of [EURO]11 million which is included in other income of the Commercial
Vehicles segment. DaimlerChrysler's remaining 40% interest in Mercedes-Benz Lenkungen GmbH is accounted for using the equity method. The following assets and liabilities were part of this
disposal group in 2003: [EURO]30.3 million fixed assets, [EURO]114.9 million current assets, [EURO]33.2 million liabilities and [EURO]63.2 million accrued liabilities.

In
September 2003, as part of the Group's ongoing strategy to focus on its core automotive business, DaimlerChrysler sold its 50% interest in CTS Fahrzeug-Dachsysteme GmbH to
Porsche AG for [EURO]55 million in cash, resulting in a pretax gain of [EURO]50 million which is included in financial income (expense), net, of the Mercedes Car Group segment. Prior to
the sale, DaimlerChrysler accounted for CTS Fahrzeug-Dachsysteme GmbH using the cost method.

On
January 6, 2003, MMC spun off its "Fuso Truck and Bus" division, creating Mitsubishi Fuso Truck and Bus Corporation ("MFTBC"). On March 14, 2003, as part of the Group's
global commercial vehicle strategy, DaimlerChrysler acquired from MMC a 43% non-controlling interest in MFTBC. The final purchase price was [EURO]764 million in cash. Also, on
March 14, 2003, ten Mitsubishi Group companies, including Mitsubishi Corporation, Mitsubishi Heavy Industries and Bank of Tokyo-Mitsubishi, entered into a separate share sale and purchase
agreement with MMC pursuant to which they purchased from MMC 15% of MFTBC's shares for approximately [EURO]266 million in cash. As a result of these transactions, MMC now retains a 42%
non-controlling interest in MFTBC. DaimlerChrysler allocated [EURO]34 million of the total purchase price of its 43% interest in MFTBC to investor-level goodwill (see
Note 12). In addition, [EURO]36 million of the purchase price of the Group's investment in MMC, which was allocated to MFTBC's business during initial equity method accounting of MMC in
2000 and 2001, was allocated to the investment in MFTBC of the Commercial Vehicle segment. DaimlerChrysler accounts for its investment in MFTBC using the equity method (see Note 3). The Group's
proportionate share of MFTBC's results are included in the Group's Commercial Vehicles segment. As described in Note 38, on January 15, 2004, DaimlerChrysler entered into a purchase
agreement with MMC to acquire an additional 22% equity interest in MFTBC at an expected purchase price of approximately [EURO]0.4 billion in cash. This transaction is dependant on the

F-26

---

approval
of the individual governmental and antitrust authorities of the countries concerned. The Group expects the transaction to be consummated in March 2004 and to consolidate MFTBC in the
second quarter of 2004.

During
2003, in separate transactions, the Group acquired 11 (2002: 18) dealerships in Europe, none of which were material. The aggregate purchase price paid in these separate
acquisitions amounted to [EURO]56 million (2002: [EURO]86 million) and resulted in additions to goodwill of approximately [EURO]26 million (2002: [EURO]61 million).

In
the fourth quarter of 2002, as part of the Group's ongoing strategy to focus on its core automotive business, DaimlerChrysler entered into an agreement to sell a 51% controlling
interest in VM Motori S.p.A. and its 100% ownership interest in Detroit Diesel Motores do Brasil Ltda., both wholly-owned subsidiaries of DaimlerChrysler. The transactions were completed by the
fourth quarter of 2003. Based on the agreed purchase price of [EURO]26 million, DaimlerChrysler recorded an impairment charge in 2002 for long-lived assets and goodwill related to
the disposal groups and long-lived assets and goodwill to be retained. The total asset impairment and goodwill impairment charges recognized in 2002 were [EURO]1 million and
[EURO]40 million, respectively, which are included in other expenses of the Commercial Vehicles segment (see also Note 5). The following assets and liabilities were classified as
held-for-sale as of December 31, 2002: fixed assets of [EURO]74 million, current assets of [EURO]48 million, liabilities of [EURO]95 million, and
accrued liabilities of [EURO]7 million. DaimlerChrysler accounts for its remaining 49% interest in VM Motori S.p.A. using the equity method.

In
January 2002, DaimlerChrysler exercised its option to sell to Deutsche Telekom the Group's 49.9% interest in T-Systems ITS, which had been accounted for using the
equity method, for [EURO]4,694 million in cash. The sale, which was part of DaimlerChrysler's ongoing strategy to focus on its core automotive business,
was consummated in March 2002 with the termination of the information technology joint venture, resulting in a pretax gain of [EURO]2,484 million that is included in the financial income
of the Services segment.

In
June 2001, as part of the Group's global commercial vehicle strategy, DaimlerChrysler entered into a commercial vehicle joint venture agreement with Hyundai Motor Company
("HMC"). In the first phase of the commercial vehicle joint venture, the Group and HMC established DaimlerHyundai Truck Corporation ("DHTC"). The Group acquired a non-controlling (50%)
interest in DHTC for [EURO]44 million in cash. DaimlerChrysler accounts for its investment in DHTC using the equity method. Because DaimlerChrysler is unable to obtain U.S. GAAP information on
a timely basis from DHTC, the Group includes its proportionate share of DHTC's results of operations on a three month lag. DHTC was formed to manufacture and distribute engines and engine parts.
DaimlerChrysler expects the start of production in mid 2004. The commercial vehicle joint venture agreement with HMC includes an option for DaimlerChrysler to acquire 50% of the commercial vehicle
business of HMC for approximately [EURO]400 million in cash. Pursuant to this option, which DaimlerChrysler exercised in December 2002, it is intended HMC would contribute its entire
commercial vehicle business to a new legal entity. As of December 31, 2003, discussions regarding the formation of the commercial vehicle joint venture between the Group and HMC are still
ongoing and the establishment is therefore indefinite. The purpose of the new commercial vehicle joint venture is to design, produce and distribute commercial vehicles above 4 tons gross vehicle
weight (GVW), including buses, as well as components for those vehicles. As of December 31, 2003, the Group held a 10% interest in HMC that was acquired in two installments in
September 2000 and in March 2001 for approximately [EURO]484 million in cash. DaimlerChrysler accounts for its investment in HMC as an "investment" at fair value. Unrealized gains
and losses are recognized without affecting net income as available-for-sale securities.

Also
in June 2001, Volvo AB sold its 3.3% interest in MMC, plus its operational contracts with MMC, to DaimlerChrysler for [EURO]343 million increasing DaimlerChrysler's
interest in MMC to 37.3%. As of December 2003, the Group's investment in MMC has been reduced to 37.0% through various rights offerings.

In
April 2001, as part of the Group's strategy to focus on its core automotive business, DaimlerChrysler completed the sale of 60% of the interest in its Automotive Electronics
activities to Continental AG for [EURO]

F-27

---

398 million
in cash. The sale resulted in a pretax gain of [EURO]209 million that is included in other income of the Other Activities segment. The following assets and liabilities were
included in this disposal group in 2001: [EURO]214 million fixed assets, [EURO]387 million current assets, [EURO]205 million liabilities and [EURO]121 million accrued
liabilities. In April 2002, DaimlerChrysler exercised its option to sell to Continental AG the Group's remaining 40% interest in the Automotive Electronics activities, which had been accounted
for using the equity method, for [EURO]215 million in cash. The sale resulted in a pretax gain of [EURO]128 million that is included in financial income (expense), net, of the Other
Activities segment.

In
August 2000, as part of the Group's strategy to focus on its core automotive business, DaimlerChrysler signed a sale and purchase agreement with the Canadian company
Bombardier Inc. for the sale of its 100% interest in DaimlerChrysler Rail Systems GmbH ("Adtranz"). With the closing of the transaction on April 30, 2001, control over the operations of
Adtranz was transferred to Bombardier on May 1, 2001. Accordingly, the
operating results of Adtranz are included in the consolidated financial statements of DaimlerChrysler through April 30, 2001. The Adtranz sales price of $725 million was received during
2001 (see Note 30). The sale of Adtranz resulted in a pretax gain of [EURO]250 million that is included in other income of the Other Activities segment. The following assets and
liabilities were included in this disposal group in 2001: [EURO]945 million fixed assets, [EURO]1,908 million current assets, [EURO]1,076 million liabilities and
[EURO]1,213 million accrued liabilities.

Notes to Consolidated Statements of Income (Loss)

5. Functional Costs and Other Expenses

Selling, administrative and other expenses are comprised of the following:

Year ended December 31,(in millions of [EURO])

2003

2002

2001Selling expenses

11,763

11,981

11,772Administration expenses

5,351

5,346

5,500Goodwill amortization and impairments



40

184Other expenses

658

799

77917,772

18,166

18,235


In
2003, selling expenses include advertising costs of [EURO]2,965 million (2002: [EURO]2,811 million, 2001: [EURO]2,944 million).

In
2003, DaimlerChrysler recognized in accordance with the provisions of SFAS 144 an impairment charge amounting to [EURO]77 million related to certain
long-lived assets (primarily property, plant and equipment) at a production facility in Brazil. The charge is included in cost of sales of the Mercedes Car Group segment.

In
2002, DaimlerChrysler recognized in accordance with the provisions of SFAS 144 an impairment charge amounting to [EURO]201 million. Moderate demand and strong
competition in the European market for commercial vehicles resulted in idle capacity at one of the Group's German assembly plants. Consequently, DaimlerChrysler determined that it does not expect to
recover the carrying value of certain long-lived assets (primarily manufacturing equipment and tooling) at this plant. The charge is included in cost of sales of the Commercial Vehicles
segment.

In
2002, a goodwill impairment charge of [EURO]40 million was recognized in connection with the contracted sale of controlling interests in two businesses in the Commercial
Vehicles segment (see Note 4).

In
October 2002, DaimlerChrysler entered into an agreement to sell to GE Capital a significant portion of its portfolio of corporate aircraft, consisting of finance lease
receivables and owned aircraft currently under operating

F-28

---

leases,
over a period of approximately 12 months. The agreement contained provisions for DaimlerChrysler to receive a share of future payments throughout the remaining terms of the contracts in
the portfolio. In connection with the agreement, the Group classified as held-for-sale at December 31, 2002, finance lease receivables with a carrying value of [EURO]493 million and
equipment under operating leases with a carrying value of [EURO]40 million. The agreement with GE Capital was not consummated as of December 31, 2002. Due primarily to adverse economic
conditions, the Group reassessed the recoverability of its leasing portfolio as of December 31, 2002.

Based
on the results of this reassessment, the Services segment recognized impairment losses of [EURO]191 million in other expenses and [EURO]20 million in cost of sales.
DaimlerChrysler consummated the GE Capital transaction in 2003 pursuant to which the Services segment sold finance lease receivables totaling [EURO]113 million and equipment under operating
leases totaling [EURO]14 million for cash to GE Capital.

During
2003, the Group also sold finance lease receivables totaling [EURO]191 million and operate leases totaling [EURO]5 million to other investors. At December 31,
2003, after adjustments for currency translation effects, finance lease receivables of [EURO]98 million and equipment under operating leases totaling [EURO]17 million are classified as
held for sale.

Held
for sale and held for use finance lease receivables and equipment under operating leases are classified in the December 31, 2003 and 2002 balance sheets as receivables from
financial services and equipment on operating leases, net, respectively.

In
2002, due to declining resale prices of used passenger cars and commercial vehicles in North America, DaimlerChrysler recognized impairment charges totaling [EURO]256 million
upon re-evaluation of the recoverability of the carrying value of its leased vehicles. This re-evaluation was performed using product specific cash flow information. As a
result, the carrying values of these leased vehicles were determined to be impaired as the identifiable undiscounted future cash flows were less than their respective carrying values. In accordance
with SFAS 144, the resulting impairment charges, recorded as a component of cost of sales in the Services segment, represent the amount by which the carrying values of such vehicles exceeded
their respective fair market values.

Following
a decision of DaimlerChrysler's Board of Management in the fourth quarter of 2001, DaimlerChrysler, GE Capital and other financial services providers reached an agreement
during the six months ended June 30, 2002, to purchase a portion of the DaimlerChrysler's commercial real estate and asset-based lending portfolios in the United States for
[EURO]1,260 million. The decision resulted in a charge of [EURO]166 million, which is included in other expenses of the Services segment in 2001.

As
discussed in Note 7, the DaimlerChrysler Supervisory Board approved a multi-year turnaround plan for the Chrysler Group in February 2001. The related charges
are presented as a separate line item on the accompanying consolidated statements of income (loss) and are not reflected in cost of sales or selling, administrative and other expenses.

In
October 2001, the DaimlerChrysler Board of Management approved a turnaround plan for its North American truck subsidiary Freightliner. The turnaround plan is designed to return
Freightliner to sustainable profitability and comprises four main elements: material cost savings, production cost savings, overhead reductions and improvements to the existing business model. The
implementation of the turnaround plan resulted in charges of [EURO]310 million, reflecting employee termination benefits of [EURO]83 million, asset impairment charges of
[EURO]170 million, and other costs to exit certain activities of [EURO]57 million (see Note 25b). The charges were recorded in cost of sales ([EURO]173 million) and
selling, administrative and other expenses ([EURO]137 million) in 2001. Employee termination benefits related to voluntary and involuntary severance measures affected hourly and salaried
employees. As a result of the voluntary and involuntary measures, 188 hourly and salaried employees were affected by the plan in 2003 (2002: 1,314 and 2001: 1,484). The amount of employee
termination benefit paid was [EURO]2 million in 2003 (2002: [EURO]38 million and 2001: [EURO]20 million).

F-29

---

Personnel
expenses included in the statement of income (loss) are comprised of:

Year ended December 31,(in millions of [EURO])

2003

2002

2001Wages and salaries

18,897

19,701

20,073Social levies

3,178

3,132

3,193Net pension cost (see Note 25a)

837

152

630Net postretirement benefit cost (see Note 25a)

1,290

1,119

1,173Other expenses for pensions and retirements

85

59

2624,287

24,163

25,095


Number
of employees (annual average):

2003

2002

2001Hourly employees

226,989

232,304

244,938Salaried employees

129,656

125,110

122,094Trainees/apprentices

14,039

13,263

12,512370,684

370,677

379,544


In
2001, 28 people were employed in joint venture companies.

Information
on the remuneration to the current members of the Supervisory Board and the Board of Management is included in Note 37. In 2003, disbursements to former members of the
Board of Management of DaimlerChrysler AG and their survivors amounted to [EURO]12.7 million. An amount of [EURO]163.1 million has been accrued for pension obligations to former members
of the Board of Management and their survivors. As of December 31, 2003, no advances or loans existed to members of the Board of Management of DaimlerChrysler AG.

6. Other Income

Other income consists of the following:

Year ended December 31,(in millions of [EURO])

2003

2002

2001Gains of sales of property, plant and equipment

58

48

100Rental income, other than relating to financial services

110

197

191Gains on sales of companies

11



465Income from employee leasing programs

71

81

86Reimbursement of contract costs

17

63

25Government subsidies

63

56

19Other miscellaneous items

383

332

315713

777

1,201


Other
miscellaneous items consist of reimbursements under insurance policies, income from licenses, reimbursements of certain non-income related taxes and customs duties,
income from various employee canteens and other miscellaneous items.

In
2003, MTU Friedrichshafen GmbH, a fully consolidated company of the Group, created a new company, MTU CFC Solutions GmbH ("MTU CFC"), and contributed all of its fuel cell activities
into a new company for 100%

F-30

---

ownership
interest. Also in 2003, MTU CFC issued new shares to RWE Fuel Cells GmbH for a capital contribution. MTU Friedrichshafen GmbH did not participate in this increase in share capital causing
the ownership interest of MTU Friedrichshafen GmbH in MTU CFC to dilute to 74.9%. As a result of this transaction, DaimlerChrysler realized a gain of [EURO]24 million, which is also included in
other miscellaneous income.

7. Turnaround Plan for the Chrysler Group

The DaimlerChrysler Supervisory Board approved a multi-year turnaround plan for the Chrysler Group in 2001. Key initiatives for the turnaround plan
over the period 2001 through 2003 included a workforce reduction and an elimination of excess capacity. The workforce reduction affected represented and non-represented hourly and salaried
employees. To eliminate excess capacity, the Chrysler Group has eliminated shifts and reduced line speeds at certain manufacturing facilities, and adjusted volumes at component, stamping and
powertrain facilities. Additionally, the Chrysler Group has or is in the process of idling, closing or disposing of certain manufacturing plants.

The
net charges recorded for the plan in the year ended December 31, 2001 were [EURO]3,064 million ([EURO]1,934 million net of taxes) and are presented as a separate
line item on the accompanying consolidated statements of income (loss) ([EURO]2,555 million and [EURO]509 million would have otherwise been reflected in cost of sales and selling,
administrative and other expenses, respectively). The initial charges of [EURO]3,047 million were recorded in February 2001 with the approval of the turnaround plan. Additional charges
of [EURO]268 million in 2001 resulted from the subsequent impairment and disposal costs associated with a component plant as well as costs for a special early retirement program. The return to
income adjustments of [EURO]251 million in 2001 include revisions of estimates based upon information currently available or actual settlements. These adjustments reflect lower than anticipated
costs associated with workforce reduction initiatives, including the involuntary severance benefits, and favorable resolution of supplier contract cancellation claims.

The
net charges recorded for the plan in 2002, were [EURO]694 million ([EURO]439 million, net of taxes) and are presented as a separate line item on the accompanying
consolidated statements of income (loss) ([EURO]680 million and [EURO]14 million would have otherwise been reflected in cost of sales and selling, administrative and other
expenses, respectively). These additional charges and adjustments were for costs associated with the idling, closing or disposal of certain manufacturing facilities in 2002 and 2003 and ongoing
workforce reduction measures as well as revisions of estimates based upon information currently available or actual settlements.

The
net charges recorded for the plan in 2003, were [EURO]469 million ([EURO]288 million, net of taxes) and are presented as a separate line item on the accompanying
consolidated statements of income (loss) ([EURO]462 million and [EURO]7 million would have otherwise been reflected in cost of sales and selling, administrative and other expenses,
respectively). These additional charges and adjustments were recorded for costs associated with the closing, significant downsizing or sale of certain manufacturing facilities in 2003, 2004 and 2005,
related workforce reduction measures as well as revisions of estimates based upon information currently available or actual settlements.

F-31

---

The
pretax amounts for turnaround plan charges since initiation in the first quarter of 2001 are comprised of the following:

|(in millions of [EURO])              |                                                                    | Workforce
reductions |       | Asset
write-downs |      | Other costs |      | Total |       
|------------------------------------ | ------------------------------------------------------------------ | -------------------- | ----- | ----------------- | ---- | ----------- | ---- | ----- | ------
|Reserve balance at January 1, 2001   |                                                                    |                     |       |                  |      |            |      |      |       
|                                     | Initial charges                                                    |                      | 1,403 |                   | 836  |             | 808  |       | 3,047 
|                                     | Additional charges                                                 |                      | 93    |                   | 148  |             | 27   |       | 268   
|                                     | Adjustments                                                        |                      | (122  | )                 |     |             | (129 | )     | (251  
|                                     |                                                                    |                      |       |                   |      |             |      |       |       
|Net charges                          |                                                                    | 1,374                |       | 984               |      | 706         |      | 3,064 |       
|                                     |                                                                    |                      |       |                   |      |             |      |       |       
|                                     | Payments                                                           |                      | (211  | )                 |     |             | (154 | )     | (365  
|                                     | Amount charged against assets                                      |                      |      |                   | (984 | )           | (63  | )     | (1,047
|                                     | Amount recognized by and transferred to the employee benefit plans |                      | (695  | )                 |     |             |     |       | (695  
|                                     | Currency translation adjustment                                    |                      | 38    |                   |     |             | 21   |       | 59    
|                                     |                                                                    |                      |       |                   |      |             |      |       |       
|Reserve balance at December 31, 2001 |                                                                    | 506                  |       |                  |      | 510         |      | 1,016 |       
|                                     |                                                                    |                      |       |                   |      |             |      |       |       
|                                     | Additional charges                                                 |                      | 353   |                   | 269  |             | 99   |       | 721   
|                                     | Adjustments                                                        |                      | (41   | )                 | 30   |             | (16  | )     | (27   
|                                     |                                                                    |                      |       |                   |      |             |      |       |       
|Net charges                          |                                                                    | 312                  |       | 299               |      | 83          |      | 694   |       
|                                     |                                                                    |                      |       |                   |      |             |      |       |       
|                                     | Payments                                                           |                      | (297  | )                 |     |             | (215 | )     | (512  
|                                     | Amount charged against assets                                      |                      |      |                   | (299 | )           | (6   | )     | (305  
|                                     | Amount recognized by and transferred to the employee benefit plans |                      | (152  | )                 |     |             |     |       | (152  
|                                     | Currency translation adjustment                                    |                      | (89   | )                 |     |             | (67  | )     | (156  
|                                     |                                                                    |                      |       |                   |      |             |      |       |       
|Reserve balance at December 31, 2002 |                                                                    | 280                  |       |                  |      | 305         |      | 585   |       
|                                     |                                                                    |                      |       |                   |      |             |      |       |       
|                                     | Additional charges                                                 |                      | 182   |                   | 234  |             | 26   |       | 442   
|                                     | Adjustments                                                        |                      | 27    |                   | 15   |             | (15  | )     | 27    
|                                     |                                                                    |                      |       |                   |      |             |      |       |       
|Net charges                          |                                                                    | 209                  |       | 249               |      | 11          |      | 469   |       
|                                     |                                                                    |                      |       |                   |      |             |      |       |       
|                                     | Payments                                                           |                      | (151  | )                 |     |             | (128 | )     | (279  
|                                     | Amount charged against assets                                      |                      |      |                   | (249 | )           | (3   | )     | (252  
|                                     | Amount recognized by and transferred to the employee benefit plans |                      | (108  | )                 |     |             |     |       | (108  
|                                     | Currency translation adjustment                                    |                      | (32   | )                 |     |             | (37  | )     | (69   
|                                     |                                                                    |                      |       |                   |      |             |      |       |       
|Reserve balance at December 31, 2003 |                                                                    | 198                  |       |                  |      | 148         |      | 346   |       
|                                     |                                                                    |                      |       |                   |      |             |      |       |       

Workforce
reduction charges in 2003, 2002 and 2001 relate to early retirement incentive programs ([EURO]69 million, [EURO]160 million and [EURO]725 million,
respectively) and involuntary severance benefits ([EURO]140 million, [EURO]152 million and [EURO]649 million, respectively). The voluntary early retirement programs, accepted by
1,827, 3,175 and 9,261 employees in 2003, 2002 and 2001, respectively, are formula driven based on salary levels, age and past service. In addition, 1,355, 5,106 and 7,174 employees were involuntarily
affected by the plan in 2003, 2002 and 2001, respectively. The amount of involuntary severance benefits paid and charged against the liability was [EURO]20 million, [EURO]199 million and
[EURO]131 million in 2003, 2002 and 2001, respectively. The amount recognized by and transferred to the employee benefit plans represents the cost of the special early retirement programs and
the

F-32

---

curtailment
of prior service costs actuarially recognized by the pension and postretirement health and life insurance benefit plans.

As
a result of the planned idling, closing, significant downsizing or sale of certain manufacturing facilities, the ability to recover the carrying values of certain
long-lived assets at these plants were determined to be impaired. Accordingly, the Chrysler Group recorded impairment charges of [EURO]249 million, [EURO]299 million and
[EURO]984 million in 2003, 2002 and 2001, respectively. The impairment charges represent the amount by which the carrying values of the property, plant, equipment and tooling exceeded their
respective fair market values.

The
Chrysler Group sold the Dayton Thermal Products facility on May 1, 2002 to a joint venture company with Behr America, Inc. and will maintain a minority interest for two
years. In addition, the Chrysler Group sold the Graz, Austria plant to Magna International Inc. on July 12, 2002. The exit costs of these two plant sales were previously provided for in
the turnaround plan charges.

In
January 2003, DaimlerChrysler Corporation contributed its New Castle machining and forging facility to NC-M Chassis Systems LLC, a joint venture company formed with
Metaldyne Corporation ("Metaldyne"). DaimlerChrysler Corporation owned 60% of the common stock of the joint venture company and Metaldyne owned the remaining 40%. In December 2003, Metaldyne
exercised its option to purchase DaimlerChrysler Corporation's 60% interest in the NC-M Chassis Systems LLC joint venture company in exchange for cash and Metaldyne subordinated debt and
preferred equity securities. Also in 2003, DaimlerChrysler Corporation committed to a plan for the closure, significant downsizing or sale of two other facilities. The exit costs of these actions are
provided for in the turnaround plan charges.

Other
costs primarily included supplier contract cancellation and facility deactivation costs.

The
Chrysler Group expects cash payments of $0.3 billion in 2004 for previously recorded charges. The Chrysler Group may recognize charges in 2004 primarily relating to the sale
or closure of selected operations.

F-33

---



8. Financial Income (expense), net

Year ended December 31,(in millions of [EURO])

2003

2002

2001Income from investments of which from affiliated companies [EURO]37 (2002: [EURO]44; 2001: [EURO](2))

37

73

24Gains, net from disposals of investments and shares in affiliated and associated companies

44

2,645

320Impairment of investment in EADS

(1,960
)


Write-down of investments and shares in affiliated companies

(44
)
(63
)
(109
)Income (loss) from companies included at equity

(538
)
(17
)
97Income (loss) from investments, net

(2,461
)
2,638

332Other interest and similar income of which from affiliated companies [EURO]20 (2002: [EURO]9; 2001: [EURO]31)

521

720

1,040Interest and similar expenses of which from affiliated companies [EURO]16 (2002: [EURO]21; 2001: [EURO]21)

(911
)
(1,040
)
(1,317
)Interest expense, net

(390
)
(320
)
(277
)Income (loss) from securities and long-term receivables of which from affiliated companies [EURO]1 (2002: [EURO]7; 2001: [EURO]9)

(15
)
84

291Write-down of securities and long-term receivables

(19
)
(71
)
(16
)Other, net

69

(125
)
(177
)Other financial income (loss), net

35

(112
)
98(2,816
)
2,206

153


DaimlerChrysler
recognized an other-than-temporary impairment charge of [EURO]1.96 billion in the Group's consolidated statement of income (loss) for the
third quarter of 2003, to write-down its investment in EADS to its quoted market value on that date. On that date, the carrying value of the Group's investment in EADS approximated
[EURO]5.5 billion and its fair value (based on quoted market price) approximated [EURO]3.5 billion.

In
2002, the Group sold its 49.9% interest in T-Systems ITS. This sale resulted in a gain of [EURO]2,484 million, which is included in gains from disposals of
investments and shares in affiliated and associated companies (see Note 4).

In
2001, EADS created a new company, Airbus SAS, and contributed all of its Airbus activities into the new company for a 100% ownership interest. Also in 2001, Airbus SAS issued new
shares to BAe Systems in exchange for all of its Airbus activities. As a result of this transaction, EADS' ownership interest in Airbus SAS, which is consolidated by EADS, was diluted to 80%.
DaimlerChrysler recognized under U.S. GAAP its share of the gain resulting from the formation of Airbus SAS in the amount of [EURO]747 million in income (loss) from companies included at
equity.

The
Group capitalized interest expenses related to qualifying construction projects of [EURO]100 million (2002: [EURO]147 million; 2001: [EURO]275 million).

F-34

---

9. Income Taxes

Income (loss) before income taxes consists of the following:

Year ended December 31,(in millions of [EURO])

2003

2002

2001Germany

(736
)
4,205

4,301Non-German countries

1,332

1,720

(5,955
)596

5,925

(1,654
)


The
income (loss) in Germany includes the income (loss) from companies included at equity if the shares of those companies are held by German companies. In 2003, the
write-down of the investment in EADS of [EURO]1,960 million is also included.

Income
tax expense (benefit) is comprised of the following components:

Year ended December 31,(in millions of [EURO])

2003

2002

2001Current taxesGermany

766

1,141

705Non-German countries

(432
)
(286
)
(512
)Deferred taxesGermany

172

(441
)
642Non-German countries

473

701

(1,684
)979

1,115

(849
)


For
German companies, the deferred taxes at December 31, 2003, were calculated using a federal corporate tax rate of 25% (2002: 26.5% for deferred taxes which will reverse in 2003
and 25% for deferred taxes which will reverse after 2003; 2001: 25%). Deferred taxes were also calculated with a solidarity surcharge of 5.5% for each year on federal corporate taxes plus the after
federal tax benefit rate for trade tax of 12.125% (2002: 11.842% for deferred taxes which will reverse in 2003 and 12.125% for deferred taxes which will reverse after
2003; 2001: 12.125%). Including the impact of the surcharge and the trade tax, the tax rate applied to German deferred taxes amounted to 38.5% (2002: 39.8% for deferred taxes which will reverse in
2003 and 38.5% for deferred taxes which will reverse after 2003; 2001: 38.5%).

In
2003, the German government enacted new tax legislation which, among other changes, provides that, beginning January 1, 2004, 5% of dividends received from German companies and
5% from certain gains from the sale of shares in affiliated and unaffiliated companies are no longer tax-free while losses from the sale of shares in affiliated and unaffiliated companies
continue to be non-deductible. The change in tax legislation resulted in a deferred tax expense due to the deferred tax liabilities on the unrealized gains. The effect of the increase in
the deferred tax liabilities of the Group's German companies was recognized in the year of enactment and as a result, a deferred tax expense of [EURO]64 million was included in the consolidated
statement of income (loss) in 2003.

In
2002, the German government enacted new tax legislation for the purpose of financing the flood disaster which, among other changes, increased the Group's statutory corporate tax rate
for German companies from 25% to 26.5%, effective only for the calendar year 2003. The effect of the increase in the tax rate on the deferred tax assets and liabilities of the Group's German companies
was recognized in the year of enactment and as a result, a net charge of [EURO]3 million was included in the consolidated statement of income (loss) in 2002.

F-35

---

The
effect of the tax law changes in Germany in 2003 and 2002 are reflected separately in the reconciliations presented below.

A
reconciliation of expected income tax expense (benefit) to actual income tax expense (benefit) determined using the applicable German corporate tax rate for the calendar year of 26.5%
(2002 and 2001: 25%) plus a solidarity surcharge of 5.5% on federal corporate taxes payable plus the after federal tax benefit rate for trade taxes of 11.842% (2002 and 2001: 12.125%) for a combined
statutory rate of 39.8% in 2003 (2002 and 2001: 38.5%) is as follows:

Year ended December 31,(in millions of [EURO])

2003

2002

2001Expected expense (benefit) for income taxes

237

2,281

(637
)Tax rate differential with non-German countries

(489
)
(247
)
97Gains from sales of business interests (T-Systems ITS, TEMIC, Adtranz, debitel)



(1,012
)
(191
)Trade tax rate differential

(37
)
(34
)
(54
)Changes in valuation allowances on German deferred
tax assets





29Non-deductible equity method investment impairment

780



Tax effect of equity method investments

159

1

(25
)Amortization of non-deductible goodwill





5Tax free income and non-deductible expenses

269

178

(99
)Effect of changes in German tax laws

64

3

Dividend distribution credit at DCAG



(57
)
Other

(4
)
2

26Actual expense (benefit) for income taxes

979

1,115

(849
)


In
2002, income tax credits from dividend distribution reflected the tax benefit from the 2001 dividend distribution of [EURO]1.00 per Ordinary Share paid in 2002.

The
Group has various open income tax years unresolved with the taxing authorities in various jurisdictions. The open years are either currently under review by certain taxing
authorities or not yet under examination. The Group believes it has made adequate liabilities accrued for any future income taxes that may be owed for all open years. Included in the line "tax rate
differential with non-German countries" above is a tax benefit and related interest of [EURO]571 million which have resulted in 2003 in connection with agreements reached with the
tax authorities in the U.S. on a claim pertaining to additional research and development credits for tax years 1986 through 1998. Included in the line "tax free income and non-deductible
expenses" is a tax expense and related interest of [EURO]318 million pertaining primarily to tax costs associated with current year developments resulting from the examination of the German tax
Group's tax filings by the German tax authorities for the years 1994 to 1998.

F-36

---

Deferred
income tax assets and liabilities are summarized as follows:

At December 31,(in millions of [EURO])

2003

2002Property, plant and equipment

637

611Investments and long-term financial assets

2,387

2,132Equipment on operating leases

727

956Inventories

565

709Receivables

429

663Securities

522

28Net operating loss and tax credit carryforwards

2,996

3,002Pension plans and similar obligations

3,205

3,424Other accrued liabilities

4,573

4,938Liabilities

1,330

1,733Deferred income

1,069

1,138Other

77

9218,517

19,426Valuation allowances

(229
)
(241
)Deferred tax assets

18,288

19,185Property, plant and equipment

(3,702
)
(3,733
)Equipment on operating leases

(6,333
)
(7,855
)Receivables

(3,068
)
(2,558
)Securities

(736
)
(472
)Prepaid expenses

(366
)
(388
)Pension plans and similar obligations

(2,124
)
(1,497
)Other accrued liabilities

(166
)
(112
)Taxes on undistributed earnings of non-German subsidiaries

(331
)
(399
)Liabilities

(1,020
)
(567
)Other

(490
)
(303
)Deferred tax liabilities

(18,336
)
(17,884
)Deferred tax assets (liabilities), net

(48
)
1,301


At
December 31, 2003, the Group had corporate tax net operating losses ("NOLs") amounting to [EURO]2,991 million (2002: [EURO]2,346 million), trade tax NOLs
amounting to [EURO]40 million (2002: [EURO]2,888 million) and credit carryforwards amounting to [EURO]1,700 million (2002: [EURO]1,788 million). The corporate tax NOLs
mainly relate to losses of U.S. companies and are partly limited in their use to the Group. Of the total, corporate tax NOLs amounting to [EURO]126 million expire at various dates from 2005
through 2013, [EURO]2,524 million expire in the year 2023 and [EURO]341 million can be carried forward indefinitely. The credit carryforwards relate to U.S. companies and are partly
limited in their use to the Group. Of the total, credit carryforwards amounting to [EURO]58 million expire from 2005 through 2022, [EURO]1,024 million expire in the year 2023 and
[EURO]618 million can be carried forward indefinitely. The trade tax NOLs are not limited in their use.

The
valuation allowances on deferred tax assets decreased by [EURO]12 million. In future periods, depending upon the 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.

F-37

---

Net
deferred income tax assets and liabilities in the consolidated balance sheets are as follows:

At December 31, 2003

At December 31, 2002(in millions of [EURO])

Total

thereof
non-current

Total

thereof
non-currentDeferred tax assets

2,688

1,982

3,613

1,714Deferred tax liabilities

(2,736
)
(595
)
(2,312
)
(1,535
)Deferred tax assets (liabilities), net

(48
)
1,387

1,301

179


DaimlerChrysler
recorded deferred tax liabilities for non-German withholding taxes of [EURO]239 million (2002: [EURO]288 million) on [EURO]4,782 million
(2002: [EURO]5,760 million) in cumulative undistributed earnings of non-German subsidiaries and additional German tax of [EURO]92 million (2002: [EURO]111 million) on
the
future payout of these foreign dividends because the earnings are not intended to be permanently reinvested in those operations.

The
Group did not provide income taxes or non-German withholding taxes on [EURO]7,891 million (2002: [EURO]6,950 million) in cumulative earnings of
non-German subsidiaries because the earnings are intended to be indefinitely reinvested in those operations. It is not practicable to estimate the amount of unrecognized deferred tax
liabilities for these undistributed foreign earnings.

Including
the items charged or credited directly to related components of accumulated other comprehensive income (loss) and the expense (benefit) of discontinued operations and from
changes in accounting principles, the expense (benefit) for income taxes consists of the following:

Year ended December 31,(in millions of [EURO])

2003

2002

2001Expense (benefit) for income taxes of continuing operations

979

1,115

(849
)Expense for income taxes of discontinued operations

202

62

72Income tax benefit from changes in accounting principles

(35
)


Stockholders' equity for items in accumulated other comprehensive income

1,105

(2,699
)
(507
)2,251

(1,522
)
(1,284
)


In
2003, tax benefits of [EURO]105 million (2002: [EURO]175 million) from the reversal of deferred tax asset valuation allowances at subsidiaries of MMC were recorded as a
reduction of the investor level goodwill relating to the Group's investment in MMC.

10. Discontinued Operations

On December 31, 2003, as a part of its ongoing strategy to focus on its core automotive business, DaimlerChrysler completed the sale of its 100% equity
ownership interest in MTU Aero Engines GmbH ("MTU Aero Engines") to Kohlberg, Kravis and Roberts & Co. Ltd., an investment company resulting in an after tax gain of
[EURO]882 million, net of taxes of [EURO]149 million (see Note 4). Pursuant to the requirements of SFAS 144, the results of MTU Aero Engines and the gain on sale are
reported as discontinued operations and the Group's consolidated financial statements for all prior periods have been adjusted to reflect this presentation. However, the operating profit of MTU Aero
Engines is included in the Other Activities segment operating profit in 2003, 2002 and 2001 (see Note 34).

F-38

---



The operating results of the discontinued operations are as follows:

Year ended December 31,(in millions of [EURO])

2003

2002

2001Revenues

1,933

2,215

2,487Income before income taxes

67

143

171Income taxes

(53
)
(62
)
(72
)Minority interests



1

2Earnings from discontinued operations

14

82

101


11. Cumulative Effects of Changes in Accounting Principles

Variable Interest Entities.DaimlerChrysler adopted the provisions of FIN 46R pertaining to the consolidation of variable
interest entities that are "special purpose entities" as of December 31, 2003 (see Note 2). The cumulative effect of adopting FIN 46R was a reduction of net income of
[EURO]30 million, net of taxes of [EURO]35 million ([EURO]0.03 per share), recognized in the consolidated statement of income (loss) in 2003.

Goodwill and Other Intangible Assets.Adoption of SFAS 142  DaimlerChrysler adopted
SFAS 142 on January 1, 2002. The after-tax transitional goodwill impairment charge recognized in the consolidated statement of income (loss) in 2002 by DaimlerChrysler was
[EURO]159 million ([EURO]0.16 per share), which represents the Group's proportionate share of the transitional goodwill impairment charges from equity method investees, primarily EADS.

12. Goodwill

Information with respect to changes in the Group's goodwill is presented in the Consolidated Fixed Assets Schedule included herein.

In
2003, goodwill of [EURO]26 million (2002: [EURO]61 million) was recorded in connection with the acquisition of dealerships in Europe and [EURO]20 million (2002:
[EURO]71 million) was recorded in connection with certain other acquisitions, each of which were immaterial individually and in the aggregate. In 2002, a goodwill impairment charge of
[EURO]40 million was recognized in connection with the contracted sales of two businesses in the Commercial Vehicles segment (see Note 4). The remaining changes in the carrying amount of
goodwill primarily relate to currency translation adjustments.

At
December 31, 2003, the carrying value of goodwill, excluding investor level goodwill, allocated to the Group's reportable segments are: Mercedes Car Group
[EURO]160 million (2002: [EURO]104 million), Chrysler Group [EURO]969 million (2002: [EURO]1,165 million), Commercial Vehicles [EURO]588 million (2002:
[EURO]696 million), Services [EURO]62 million (2002: [EURO]62 million) and Other Activities [EURO]37 million (2002: [EURO]44 million).

Upon
adoption of SFAS 142 in 2002, intangible assets relating to distribution rights with a net carrying amount of [EURO]44 million were reclassified from goodwill to other
intangible assets.

All
goodwill has been allocated to a reporting unit as of December 31, 2003 and 2002.

DaimlerChrysler's
investor level goodwill in companies accounted for using the equity method was [EURO]559 million at December 31, 2003 (2002: [EURO]845 million).
Such goodwill is not subject to the impairment tests required by SFAS 142. Instead, the total investment, including investor level goodwill, will continue to be evaluated for impairment when
conditions indicate that a decline in fair value of the investment below the carrying amount is other-than-temporary.

F-39

---

Adjusted Prior Period Information

Net loss and loss per share for the years ended December 31, 2001, adjusted to exclude goodwill amortization expense (including amounts recognized in
income (loss) from investments representing investor level equity method goodwill amortization) and investee level goodwill amortization resulting from the Group's investment in EADS, were as follows:

Year ended
December 31, 2001Net loss (in millions of [EURO]):Reported net loss

(662
)Goodwill amortization

236Goodwill amortization  investee level

168Adjusted net loss

(258
)Loss per share (in [EURO]):Reported loss per share  basic

(0.66
)Goodwill amortization

0.24Goodwill amortization  investee level

0.16Adjusted loss per share  basic

(0.26
)Reported loss per share  diluted

(0.66
)Goodwill amortization

0.24Goodwill amortization  investee level

0.16Adjusted loss per share  diluted

(0.26
)


13. Other Intangible Assets

Information with respect to changes in the Group's other intangible assets is presented in the Consolidated Fixed Assets Schedule included herein.

Other
intangible assets comprise:

At December 31,(in millions of [EURO])

2003

2002Other intangible assets subject to amortizationGross carrying amount

1,047

1,036Accumulated amortization

(694
)
(634
)Net carrying amount

353

402Other intangible assets not subject to amortization

2,466

2,4532,819

2,855


DaimlerChrysler's
other intangible assets subject to amortization represent concessions, industrial property rights and similar rights ([EURO]188 million) as well as software
([EURO]121 million). The additions in 2003 of [EURO]178 million (2002: [EURO]175 million) with a weighted average useful life of 4 years primarily include software.
Distribution rights amounting to [EURO]44 million were reclassified from goodwill to other intangible assets on January 1, 2002. The aggregate amortization expense for the years ended
December 2003, 2002 and 2001, was [EURO]178 million, [EURO]175 million and [EURO]172 million, respectively.

F-40

---

Amortization
expense for the gross carrying amount of other intangible assets at December 31, 2003, is estimated to be [EURO]131 million in 2004, [EURO]88 million in
2005, [EURO]51 million in 2006, [EURO]24 million in 2007 and [EURO]8 million in 2008.

Other
intangible assets not subject to amortization represent intangible pension assets.

14. Property, Plant and Equipment, net

Information with respect to changes in the Group's property, plant and equipment is presented in the Consolidated Fixed Assets Schedule included herein.

Property,
plant and equipment includes buildings, technical equipment and other equipment capitalized under capital lease agreements of [EURO]195 million (2002:
[EURO]152 million). Depreciation expense and impairment charges on assets under capital lease arrangements were [EURO]19 million (2002: [EURO]15 million; 2001:
[EURO]13 million).

Future
minimum lease payments due from property, plant and equipment under capital leases at December 31, 2003, amounted to [EURO]393 million and are as follows:

(in millions of [EURO])

2004

2005

2006

2007

2008

there-
afterFuture minimum lease payments

34

36

35

31

31

226


15. Equipment on Operating Leases, net

Information with respect to changes in the Group's equipment on operating leases is presented in the Consolidated Fixed Assets Schedule included herein. Of the
total equipment on operating leases, [EURO]23,653 million represent automobiles and commercial vehicles (2002: [EURO]27,361 million).

Noncancellable
future lease payments due from customers for equipment on operating leases at December 31, 2003, amounted to [EURO]11,499 million and are as follows:

(in millions of [EURO])

2004

2005

2006

2007

2008

there-
afterFuture lease payments

5,835

3,254

1,643

447

167

153


16. Inventories

At December 31,(in millions of [EURO])

2003

2002Raw materials and manufacturing supplies

1,569

1,900Work-in-process

2,280

2,693Finished goods, parts and products held for resale

11,350

11,567Advance payments to suppliers

59

6315,258

16,223Less: Advance payments received thereof relating to long-term contracts and programs in process [EURO]70 (2002: [EURO]127)

(310
)
(581
)14,948

15,642


Certain
of the Group's U.S. inventories are valued using the LIFO method. If the FIFO method had been used instead of the LIFO method, inventories would have been higher by
[EURO]614 million (2002: [EURO]724 million). For the years ended December 31, 2003, 2002 and 2001, inventory quantities were reduced, which resulted in a

F-41

---

liquidation
of LIFO inventory carried at lower costs which prevailed in prior years. The effect of the liquidation was to decrease cost of sales by [EURO]9 million, [EURO]42 million and
[EURO]29 million in 2003, 2002 and 2001, respectively.

17. Trade Receivables

At December 31,(in millions of [EURO])

2003

2002Receivables from sales of goods and services

6,617

6,879Long-term contracts and programs, unbilled, net of advance payments received

51

476,668

6,926Allowance for doubtful accounts

(587
)
(629
)6,081

6,297


As
of December 31, 2003, [EURO]172 million of the trade receivables mature after more than one year (2002: [EURO]110 million).

Changes
in the allowance for doubtful accounts for trade receivables were as follows:

Year ended December 31,(in millions of [EURO])

2003

2002

2001Balance at beginning of year

629

646

711Charged to costs and expenses

23

95

21Amounts written off

(48
)
(63
)
(49
)Currency translation and other changes

(17
)
(49
)
(37
)Balance at end of year

587

629

646


18. Receivables from Financial Services

At December 31,(in millions of [EURO])

2003

2002Receivables from:Sales financing

43,079

41,386Finance leases

14,298

16,42357,377

57,809Initial direct costs

217

250Unearned income

(4,576
)
(5,590
)Unguaranteed residual value of leased assets

885

1,17853,903

53,647Allowance for doubtful accounts

(1,265
)
(1,559
)52,638

52,088


As
of December 31, 2003, [EURO]33,328 million of the financing receivables mature after more than one year (2002: [EURO]34,472 million).

F-42

---

Changes
in the allowance for doubtful accounts for receivables from financial services were as follows:

Year ended December 31,(in millions of [EURO])

2003

2002

2001Balance at beginning of year

1,559

1,602

890Provisions for credit losses

553

1,004

1,446Net credit losses

(492
)
(639
)
(783
)Reversals

(63
)
(36
)
(88
)Currency translation and other changes

(292
)
(372
)
137Balance at end of year

1,265

1,559

1,602


Sales
financing and finance lease receivables consist of retail installment sales contracts secured by automobiles and commercial vehicles. Contractual maturities applicable to
receivables from sales financing and finance leases of [EURO]57,377 million at December 31, 2003, are as follows:

(in millions of [EURO])

2004

2005

2006

2007

2008

there-
afterMaturities

21,153

10,596

9,495

6,320

3,283

6,530


Actual
cash flows will vary from contractual maturities due to future sales of finance receivables, prepayments and charge-offs.

19. Other Receivables

At December 31,(in millions of [EURO])

2003

2002Receivables from affiliated companies

1,172

1,118Receivables from related companies1

922

1,265Retained interests in sold receivables and subordinated asset backed certificates

3,157

4,241Other receivables and other assets

11,485

11,67216,736

18,296Allowance for doubtful accounts

(888
)
(723
)15,848

17,573


---

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

As of December 31, 2003, [EURO]6,617 million of the other receivables mature after more than one year (2002:
[EURO]6,851 million).

F-43

---

Changes
in the allowance for doubtful accounts for other receivables were as follows:

Year ended December 31,(in millions of [EURO])

2003

2002

2001Balance at beginning of year

723

726

957Charged to costs and expenses

134

28

50Amounts written off

(2
)
(11
)
(363
)Currency translation and other changes

33

(20
)
82Balance at end of year

888

723

726


20. Securities, Investments and Long-Term Financial Assets

Information with respect to the Group's investments and long-term financial assets is presented in the Consolidated Fixed Assets Schedule included
herein. Short-term securities included in non-fixed assets are comprised of the following:

At December 31,(in millions of [EURO])

2003

2002Debt securities

3,104

3,127Equity securities

30

29Debt-based funds

134

1373,268

3,293


Carrying
amounts and fair values of debt and equity securities included in securities and investments for which fair values are readily determinable are classified as follows:

At December 31, 2003

At December 31, 2002(in millions of [EURO])

Cost

Fair value

Unrealized
Gain

Unrealized
Loss

Cost

Fair value

Unrealized
Gain

Unrealized
LossAvailable-for-sale

3,107

3,136

34

5

3,085

3,086

20

19Trading

122

132

10



202

207

6

1Short-term securities

3,229

3,268

44

5

3,287

3,293

26

20Long-term securities

246

353

107



112

197

85

Investments with quoted market price

488

802

314



488

531

43

3,963

4,423

465

5

3,887

4,021

154

20


None of the aggregate gross unrealized holding losses related to available-for-sale securities, which are presented
separately by type of security in the table below, have extended beyond 12 months. DaimlerChrysler considers these impairments to be temporary given the short duration of the respective
declines in value and because no facts or circumstances have indicated that such declines are other-than-temporary.

F-44

---

The
aggregate costs, fair values and gross unrealized holding gains and losses per security class are as follows:

At December 31, 2003

At December 31, 2002(in millions of [EURO])

Cost

Fair value

Unrealized
Gain

Unrealized
Loss

Cost

Fair value

Unrealized
Gain

Unrealized
LossEquity securities

600

1,023

423



610

733

129

6Debt securities issued by the German government and other political subdivisions

248

248





566

566

1

1Debt securities issued by non-German governments

338

343

5



280

282

2

Corporate debt securities

1,478

1,492

18

4

1,152

1,159

8

1Equity-based funds

141

141











Debt-based funds

133

135

2



147

137



10Mortgage-backed securities

570

572

3

1

534

541

8

1Other marketable debt securities

333

337

4



396

396



Available-for-sale

3,841

4,291

455

5

3,685

3,814

148

19Trading

122

132

10



202

207

6

13,963

4,423

465

5

3,887

4,021

154

20


The estimated fair values of investments in debt securities (excluding debt-based funds), by contractual maturity, are shown below.
Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalty.

At December 31,(in millions of [EURO])

2003

2002Due within one year

779

1,054Due after one year through five years

1,366

1,021Due after five years through ten years

422

382Due after ten years

425

4872,992

2,944


Proceeds
from disposals of available-for-sale securities were [EURO]2,743 million (2002: [EURO]5,254 million; 2001: [EURO]3,402 million).
Gross realized gains from sales of available-for-sale securities were [EURO]8 million (2002: [EURO]157 million; 2001: [EURO]425 million), while gross
realized losses were [EURO]15 million (2002: [EURO]23 million; 2001: [EURO]145 million). DaimlerChrysler uses the weighted average cost method as a basis for determining cost and
calculating realized gains and losses.

Other
securities classified as cash equivalents were approximately [EURO]5.3 billion and [EURO]4.6 billion at December 31, 2003 and 2002, respectively, and consisted
primarily of purchase agreements, commercial papers and certificates of deposit.

F-45

---

21. Liquid Assets

Liquid assets recorded under various balance sheet captions are as follows:

At December 31,(in millions of [EURO])

2003

2002

2001Cash and cash equivalents1originally maturing within 3 months

10,767

9,100

10,715originally maturing after 3 months

250

30

31Total cash and cash equivalents

11,017

9,130

10,746Securities

3,268

3,293

3,759Other



5

2014,285

12,428

14,525


---

(1) Cash and cash equivalents are mainly comprised of cash at banks, cash on hand and checks in transit.

The following cash flows represent supplemental information with respect to net cash provided by operating activities:

Year ended December 31,(in millions of [EURO])

2003

2002

2001Interest paid

3,207

3,615

4,616Income taxes paid (refunded)

937

(1,178
)
(624
)


For
the year ended December 31, 2003, net cash provided by financing activities included proceeds (payments) of early terminated derivatives of [EURO]556 million (2002:
[EURO]117 million; 2001: [EURO]- million).

22. Prepaid Expenses

Prepaid expenses are comprised of the following:

At December 31,(in millions of [EURO])

2003

2002Prepaid pension cost

260

243Other prepaid expenses

835

7191,095

962


As
of December 31, 2003, [EURO]434 million of the total prepaid expenses mature after more than one year (2002: [EURO]352 million).

23. Stockholders' Equity

Number of Shares Issued and Outstanding

DaimlerChrysler had issued and outstanding 1,012,824,191 registered Ordinary Shares of no par value at December 31, 2003 (2002: 1,012,803,493). Each share
represents a nominal value of [EURO]2.60 of capital stock.

F-46

---



Treasury Stock

In 2003, DaimlerChrysler purchased approximately 1.3 million (2002: 1.1 million; 2001: 1.4 million) Ordinary Shares in connection with an
employee share purchase plan, of which 1.3 million (2002: 1.1 million; 2001: 1.2 million) were re-issued to employees. The remaining 0.2 million in 2001 were
resold in the market.

Authorized and Conditional Capital

On April 9, 2003, the annual meeting authorized the Board of Management through April 8, 2008, upon approval of the Supervisory Board, to increase
capital stock by issuing new, no par value registered shares in exchange for cash contributions totaling [EURO]500 million as well as by issuing new, no par value registered shares in exchange
for non-cash contributions totaling [EURO]500 million and to increase capital stock by issuing Ordinary Shares to employees totaling [EURO]26 million. In addition,
DaimlerChrysler AG is authorized through October 9, 2004, to acquire treasury stock for certain defined purposes up to a maximum nominal amount of [EURO]263 million of capital stock,
representing approximately 10% of issued and outstanding capital stock.

DaimlerChrysler
is authorized to issue convertible bonds and notes with warrants in a nominal volume of up to [EURO]15 billion by April 18, 2005. The convertible bonds and
notes with warrants shall grant to the holders or creditors option or conversion rights for new shares in DaimlerChrysler in a nominal amount not to exceed [EURO]300 million of capital stock.
DaimlerChrysler is also entitled to grant up to 96,000,000 rights (representing up to a nominal amount of approximately [EURO]250 million of capital stock) with respect to the DaimlerChrysler
Stock Option Plan by April 18, 2005.

In
2003, no options were exercised from the Stock Option Plan 1996. In 2002, 7,035 Ordinary Shares of DaimlerChrysler were issued upon exercise of options from this Plan.

Convertible Notes

In June 1997, DaimlerChrysler issued 5.75% subordinated mandatory convertible notes due June 14, 2002, with a nominal amount of [EURO]66.83 per
note. These convertible notes represented at the date of issue a nominal amount of [EURO]508 million including 7,600,000 notes which could be converted, subject to adjustment, into 0.86631
newly issuable shares of DaimlerChrysler AG for each note before June 4, 2002. During 2002, 17,927 DaimlerChrysler Ordinary Shares were issued upon exercise (2001: 87). On June 14, 2002,
the mandatory conversion date, 7,572,881 notes were converted into 9,506,483 newly issued Ordinary Shares of DaimlerChrysler AG. The conversion price of [EURO]52.72 was determined on June 8,
2002, on the basis of the average closing auction price for the shares in Xetra-trading for the period between May 13, 2002 and June 7, 2002. Because this conversion price was below the
adjusted minimum conversion price of [EURO]53.19, the number of shares was calculated based on the adjusted minimum conversion price. Thus each shareholder received 1.25643 Ordinary Shares of
DaimlerChrysler AG per note. Fractions that remained after aggregation were settled in cash based on a conversion rate of [EURO]52.72 amounting to a total cash payment of [EURO]0.4 million.

During
1996, DaimlerChrysler Luxembourg Capital S.A., a wholly-owned subsidiary of DaimlerChrysler, issued 4.125% bearer notes with appertaining warrants due July 5, 2003, in the
amount of [EURO]613 million (with nominal value of [EURO]511 each), which entitled the bond holders to subscribe for a total of 12,366,324 shares (7,728,048 of which represent newly issued
shares totaling [EURO]383 million) of DaimlerChrysler. According to the note agreements the option price per share was [EURO]42.67 in consideration of exchange of the notes or [EURO]44.49 in
cash. The warrants expired on June 18, 2003. In 2003 (until June 18) 20,698 Ordinary Shares were issued as a result of exercises of warrants (2002: 50; 2001: zero) . The repayment for
the remaining options was made on July 5, 2003.

F-47

---

Comprehensive Income

The changes in the components of accumulated other comprehensive income (loss) are as follows:

|                                                                            |                                      | Year ended December 31,                                                       |      
|--------------------------------------------------------------------------- | ------------------------------------ | ----------------------------------------------------------------------------- | -----
|
|
|(in millions of [EURO])                                                     |                                      |                                                                               |      
|Unrealized gains (losses) on securities (incl. retained interests):         |                                      |                                                                               |      
|                                                                            |                                      | Unrealized holding gains (losses)                                             |      
|                                                                            |                                      | Reclassification adjustments for (gains) losses included in net income (loss) |      
|                                                                            |                                      |                                                                               |      
|                                                                            |                                      | Unrealized gains (losses) on securities                                       |      
|Unrealized gains (losses) on derivatives hedging variability of cash flows: |                                      |                                                                               |      
|                                                                            |                                      | Unrealized derivative gains (losses)                                          |      
|                                                                            |                                      | Reclassification adjustments for (gains) losses included in net income (loss) |      
|                                                                            |                                      |                                                                               |      
|                                                                            | Unrealized derivative gains (losses) |                                                                               | 1,900
|Minimum pension liability adjustments                                       |                                      | 662                                                                           |      
|Foreign currency translation adjustments                                    |                                      | (1,481                                                                        | )    
|                                                                            |                                      |                                                                               |      
|Other comprehensive income (loss)                                           |                                      | 1,557                                                                         |      
|                                                                            |                                      |                                                                               |      

Miscellaneous

The minority stockholders of Dornier GmbH, a subsidiary of DADC Luft- und Raumfahrt Beteiligungs AG, have the right, exercisable at any time, to
exchange their shareholdings in Dornier for cash
or holdings in DaimlerChrysler AG or its subsidiary DaimlerChrysler Luft- und Raumfahrt Holding Aktiengesellschaft. Some of the Dornier minority stockholders partially exercised this right
in 2001. In 2002, an additional minority shareholder partially exercised his right to transfer his Dornier shares to DaimlerChrysler AG.

Under
the German corporation law (Aktiengesetz), the amount of dividends available for distribution to shareholders is based upon the unappropriated accumulated earnings of
DaimlerChrysler AG (parent company only) as reported in its statutory financial statements determined in accordance with the German commercial code (Handelsgesetzbuch). For the year ended
December 31, 2003, DaimlerChrysler management has proposed a distribution of [EURO]1,519 million ([EURO]1.50 per share) of the 2003 earnings of DaimlerChrysler AG as a dividend to the
stockholders.

Exchange
rate effects on the components of other comprehensive income principally are shown within changes of the cumulative translation adjustment.

24. Stock-Based Compensation

The Group currently has two stock option plans, various stock appreciation rights ("SARs") plans and medium term incentive awards. As discussed in Note 1,
DaimlerChrysler adopted the provisions of SFAS 123 prospectively for all awards granted after December 31, 2002. Awards granted in previous periods will continue to be accounted for
using the provisions of APB 25 and related interpretations.

F-48

---

Stock Option Plans

In April 2000, the Group's shareholders approved the DaimlerChrysler Stock Option Plan 2000 which provides for the granting of stock options for the
purchase of DaimlerChrysler Ordinary Shares to eligible employees. Options granted under the Stock Option Plan 2000 are exercisable at a reference price per DaimlerChrysler Ordinary Share determined
in advance plus a 20% premium. The options become exercisable in equal installments on the second and third anniversaries from the date of grant. All unexercised options expire ten years from the date
of grant. If the market price per DaimlerChrysler Ordinary Share on the date of exercise is at least 20% higher than the reference price, the holder is entitled to receive a cash payment equal to the
original exercise premium of 20%.

The
table below shows the basic terms of options issued (in millions) under the Stock Option Plan 2000:

Year of Grant

Reference
price

Exercise
price

Options
granted

Options
outstanding

Options
exercisableAt December 31, 20032000

[EURO]62.30

[EURO]74.76

15.2

14.2

14.22001

[EURO]55.80

[EURO]66.96

18.7

17.7

8.92002

[EURO]42.93

[EURO]51.52

20.0

19.6

2003

[EURO]28.67

[EURO]34.40

20.5

20.0




In
May 2000, certain shareholders challenged the approval of the Stock Option Plan 2000 at the stockholders' meeting on April 19, 2000. In October 2000, the
Stuttgart District Court (Landgericht Stuttgart) dismissed the case and the Stuttgart Court of Appeals (Oberlandesgericht Stuttgart) dismissed an appeal in June 2001. The
shareholders appealed the decision of the Stuttgart Court of Appeals to the Federal Supreme Court (Bundesgerichtshof) in July 2001. In March 2002, the Federal Supreme Court decided not
to admit the appeal. In April 2002, a constitutional appeal was filed against this decision. The Federal Constitutional Court (Bundesverfassungsgericht) decided in May 2003 not to admit
the constitutional appeal.

DaimlerChrysler
established, based on shareholder approvals, the 1998, 1997 and 1996 Stock Option Plans (former Daimler-Benz plans), which provide for the granting of options
for the purchase of DaimlerChrysler Ordinary Shares to certain members of management. The options granted under the plans are evidenced by non-transferable convertible bonds with a
principal amount of [EURO]511 per bond due ten years after issuance. During certain specified periods each year, each convertible bond may be converted into 201 DaimlerChrysler Ordinary Shares, if the
market price per share on the day of conversion is at least 15% higher than the predetermined conversion price and the options (granted in 1998 and 1997) have been held for a 24 month waiting
period.

The
basic terms of the bonds and the related stock options issued (in millions) under these plans are as follows:

Bonds granted in

Stated
interest
rate

Conversion
price

Related
stock
options
granted

Stock
options
outstanding

Stock options
exercisableAt December 31, 20031996

5.9
%
[EURO]42.62

0.9

.

.1997

5.3
%
[EURO]65.90

7.4

5.4

1998

4.4
%
[EURO]92.30

8.2

6.2




In
the second quarter of 1999, DaimlerChrysler converted all options granted under the 1998 and 1997 Stock Option Plans into SARs. All terms and conditions of the new SARs are identical
to the stock options which were replaced, except that the holder of a SAR has the right to receive cash equal to the difference between the exercise

F-49

---

price
of the original option and the fair value of the Group's stock at the exercise date rather than receiving DaimlerChrysler Ordinary Shares.

Analysis
of the stock options issued is as follows (options in millions; per share amounts in [EURO]):

Number of
stock
options

2003
Average
exercise
price per
share

Number of
stock
options

2002
Average
exercise
price per
share

Number of
stock
options

2001
Average
exercise
price per
shareBalance at beginning of year

53.1

63.40

33.6

70.43

15.3

74.65Options granted

20.5

34.40

20.0

51.52

18.7

66.96Exercised











Forfeited

(1.2
)
51.83

(0.5
)
61.29

(0.4
)
70.08Expired

(0.8
)
74.76







Outstanding at year-end

71.6

55.18

53.1

63.40

33.6

70.43Exercisable at year-end

23.1

71.71

7.6

74.56

0.1

42.62


For
the year ended December 31, 2003, the Group recognized compensation expense on stock options (before taxes) of [EURO]95 million (2002: [EURO]57 million; 2001:
[EURO]19 million).

The
fair values of the DaimlerChrysler stock options issued in 2003, 2002 and 2001 were measured at grant date (beginning of April) based on a modified Black-Scholes option-pricing
model, which considers the specific terms of issuance. The table below presents the underlying assumptions as well as the resulting fair values and total values (in millions of [EURO]):

2003

2002

2001Expected dividend yield

5.6
%
2.0
%
4.6
%Expected volatility

35
%
30
%
33
%Risk-free interest rate

2.9
%
4.2
%
4.2
%Expected lives (in years)

3

3

3Fair value per option

[EURO]6.00

[EURO]18.70

[EURO]12.15Total value by award

[EURO]123.0

[EURO]374.0

[EURO]227.2


Unearned
compensation expense (before taxes) of all outstanding and unvested stock options as of December 31, 2003, totals [EURO]122 million (2002:
[EURO]104 million; 2001: [EURO]13 million).

Stock Appreciation Rights Plans

In 1999, DaimlerChrysler established a Stock Appreciation Rights Plan (the "SAR Plan 1999") which provides eligible employees of the Group with the right to
receive cash equal to the appreciation of DaimlerChrysler Ordinary Shares subsequent to the date of grant. The stock appreciation rights granted under the SAR Plan 1999 vest in equal installments on
the second and third anniversaries from the date of grant. All unexercised SARs expire ten years from the grant date. The exercise price of a SAR is equal to the fair market value of DaimlerChrysler's
Ordinary Shares on the date of grant. On February 24, 1999, the Group issued 11.4 million SARs at an exercise price of [EURO]89.70 each, of which 9.7 million SARs are outstanding
and exercisable at year-end 2003.

As
discussed above (see "Stock Option Plans"), in the second quarter of 1999 DaimlerChrysler converted all options granted under its existing Stock Option Plans from 1997 and 1998 into
SARs.

F-50

---

In
conjunction with the consummation of the merger between Daimler-Benz and Chrysler in 1998, the Group implemented a SAR plan through which 22.3 million SARs were
issued at an exercise price of $75.56 each, of which 15.0 million SARs are outstanding and exercisable at year-end 2003. The initial grant of SARs replaced Chrysler fixed stock
options that were converted to DaimlerChrysler Ordinary Shares as of the consummation of the merger. SARs which replaced stock options that were exercisable at the
time of the consummation of the merger were immediately exercisable at the date of grant. SARs related to stock options that were not exercisable at the date of consummation of the merger became
exercisable in two installments; 50% on the six-month and one-year anniversaries of the consummation date.

A
summary of the activity related to the Group's SAR plans as of and for the years ended December 31, 2003, 2002 and 2001 is presented below (SARs in millions; per share amounts
in [EURO]):

Number
of
SARs

2003
Weighted-
average
excercise
price

Number of
SARs

2002
Weighted-
average
exercise
price

Number of
SARs

2001
Weighted-
average
exercise
priceOutstanding at beginning of year

40.3

79.13

42.5

84.75

44.5

82.87Granted











Exercised











Forfeited

(4.0
)
75.00

(2.2
)
78.31

(2.0
)
85.93Outstanding at year-end

36.3

74.24

40.3

79.13

42.5

84.75SARs exercisable at year-end

36.3

74.24

40.3

79.13

42.5

84.75


Compensation
expense or benefit (representing the reversal of previously recognized expense) on SARs is recorded based on changes in the market price of DaimlerChrysler Ordinary Shares.
For the years ended December 31, 2003, 2002 and 2001, the Group recognized no compensation expense in connection with SARs.

Medium Term Incentive Awards

The Group grants medium term incentives to certain eligible employees that track, among others, the market value of the DaimlerChrysler Ordinary Shares over three
year performance periods. The amount ultimately earned in cash at the end of a performance period is primarily based on the degree of achievement of corporate goals derived from competitive and
internal planning benchmarks and the value of DaimlerChrysler Ordinary Shares at the end of three year performance periods. The benchmarks are return on net assets and return on sales. The Group
issued 1.3 million medium term incentives in 2003 (2002: 1.2 million; 2001: 0.9 million).

For
the year ended December 31, 2003 the Group recognized compensation expense (before taxes) of [EURO]35 million (2002: [EURO]20 million; 2001:
[EURO]17 million) in connection with the medium term incentive awards.

F-51

---

25. Accrued Liabilities

Accrued liabilities are comprised of the following:

At December 31,2003

2002Total

Due after
one year

Total

Due after
one year(in millions of [EURO])Pension plans and similar obligations (see Note 25a)

13,467

12,275

15,909

14,658Income and other taxes

2,794

946

3,621

1,602Other accrued liabilities (see Note 25b)

22,911

8,662

24,092

9,78639,172

21,883

43,622

26,046


a) Pension Plans and Similar Obligations

Pension plans and similar obligations are comprised of the following components:

At December 31,2003

2002(in millions of [EURO])Pension liabilities (pension plans)

4,951

7,393Other postretirement benefits

8,203

8,167Other benefit liabilities

313

34913,467

15,909


The
decrease of the pension liabilities of [EURO]2.4 billion resulted primarily due to the favorable return on plan assets and to the total contributions to the plan assets of
[EURO]2.1 billion in 2003.

The
unfavorable return on plan assets in 2002 has increased the underfunded status of the Group's accumulated pension benefit obligations as of December 31, 2002. Consequently,
DaimlerChrysler recognized additional pension liabilities amounting to [EURO]4.7 billion in 2002, which did not impact the consolidated statement of income in 2002. Of the
[EURO]4.7 billion, the Group recognized [EURO]2.3 billion as an intangible pension asset and [EURO]2.4 billion within other comprehensive loss.

The
increase in accrued other postretirement benefits results from currency exchange rates changes, additions minus payments and the transfer of [EURO]0.7 billion from the plan
assets for other postretirement benefits Voluntary Employees' Beneficiary Association, "VEBA" (VEBA-Trust) to the plan assets for pensions which increased the accrued liabilities.

As
described in Note 5 and Note 7, DaimlerChrysler implemented in 2001 restructuring plans at Freightliner and Chrysler Group, including certain workforce reduction
initiatives. The impacts on the pension and postretirement obligations resulting from settlements and curtailments of these turnaround plans are contained in the following disclosures.

F-52

---

Pension 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 salary earned in the last year or last five years of employment while others are fixed plans depending on ranking (both wage level and position).

Investment Policies and Strategies.

At
December 31, 2003, plan assets were invested in diversified portfolios that consisted primarily of debt and equity securities, including 2,505,604 shares of DaimlerChrysler
Ordinary Shares in a Canadian plan (14,855 shares) and in a German plan (2,490,749 shares) with a market value of [EURO]0.4 million and of [EURO]92 million, respectively. Assets and
income accruing on all pension trust and relief funds are used solely to pay pension benefits and administer the plans. The Group's pension asset allocation at December 31, 2003 and 2002, and
target allocation for the year 2004, are as follows:

Plan Assets German Plans

Plan Assets Non-German Plans2004
planned

2003

2002

2004
planned

2003

2002(in % of plan assets)Equity securities

58

57

48

64

65

57Debt securities

36

37

41

30

30

36Real estate

3

3

3

5

4

5Other

3

3

8

1

1

2


Every
3-5 years, or more frequently if appropriate, DaimlerChrysler conducts asset-liability studies for the major pension funds. DaimlerChrysler will use the
expertise of external investment and actuarial advisors. These studies are intended to determine the optimal long-term asset allocation with regard to the liability structure. The
resulting Model Portfolio allocation aims at minimizing the economic cost of defined benefit schemes. At the same time the risks should be limited to an appropriate level.

The
Model Portfolio is then expanded to a Benchmark Portfolio.

The
Benchmark Portfolio matches the asset class weights in the Model Portfolio and expands the asset class by adding of sub-asset-classes with corresponding weights to
implement an actual portfolio. By application of Modern Portfolio Theory an optimal one year target allocation is determined. This target allocation is then implemented and the performance in the
current year is tracked against the Benchmark Portfolio.

The
entire process is overseen by Investment Committees which consist of senior financial management especially from treasury and other appropriate executives. The Investment Committees
meet regularly to approve the asset allocations, and review the risks and results of the major pension funds and approve the selection and retention of external managers of specific portfolios.

The
majority of investments are in international blue chip equities on the one hand and high quality government and corporate bonds on the other hand. To maintain a wide range of
diversification and to improve return opportunities, up to approximately 20% of assets are allocated to highly promising markets such as Private Equity, High Yield Debt, Convertibles and Emerging
Markets. Internal controlling units monitor all investments. External depositary banks provide safekeeping of securities as well as reporting of transactions and assets.

F-53

---

Funded Status.The following information with respect to the Group's pension plans is presented by German Plans and
non-German Plans (principally comprised of plans in the U.S.):

At December 31, 2003

At December 31, 2002German
Plans

Non-
German
Plans

German
Plans

Non-
German
Plans(in millions of [EURO])Change in projected benefit obligations:Projected benefit obligations at beginning of year

10,941

22,008

10,483

24,139Foreign currency exchange rate changes



(3,287
)


(3,829
)Service cost

256

344

226

384Interest cost

632

1,397

629

1,622Plan amendments

5

652

(1
)
16Actuarial losses

124

1,200

45

1,199Dispositions

(361
)
(16
)


Acquisitions and other

94

240

63

37Settlement/curtailment loss

1

28

2

292Benefits paid

(527
)
(1,599
)
(506
)
(1,852
)Projected benefit obligations at end of year

11,165

20,967

10,941

22,008Change in plan assets:Fair value of plan assets at beginning of year

6,789

17,755

7,503

24,125Foreign currency exchange rate changes



(2,692
)


(3,465
)Actual return on plan assets

983

3,256

(1,101
)
(1,756
)Employer contributions

855

1,201

807

621Plan participant contributions



18



21Dispositions

(7
)
(11
)


Acquisitions and other



128



36Benefits paid

(437
)
(1,510
)
(420
)
(1,827
)Fair value of plan assets at end of year

8,183

18,145

6,789

17,755


F-54

---



A reconciliation of the funded status, which is the difference between the projected benefit obligations and the fair value of plan assets, to the amounts
recognized in the consolidated balance sheets is as follows:

|                                                                  |                                                            | At December 31, 2003 |        | At December 31, 2002 |       
|----------------------------------------------------------------- | ---------------------------------------------------------- | -------------------- | ------ | -------------------- | ------
|
|Funded status                                                     |                                                            | 2,982                |        | 2,822                |       
|Amounts not recognized:                                           |                                                            |                      |        |                      |       
|                                                                  | Unrecognized actuarial net losses                          |                      | (3,244 | )                    | (7,194
|                                                                  | Unrecognized prior service cost                            |                      | (4     | )                    | (2,541
|                                                                  | Unrecognized net obligation at date of initial application |                      |       |                      | (5    
|                                                                  |                                                            |                      |        |                      |       
|Net liability (asset) recognized                                  |                                                            | (266                 | )      | (6,918               | )     
|                                                                  |                                                            |                      |        |                      |       
|Amounts recognized in the consolidated balance sheets consist of: |                                                            |                      |        |                      |       
|                                                                  | Prepaid pension cost                                       |                      |       |                      | (260  
|                                                                  | Accrued pension liability                                  |                      | 2,355  |                      | 2,596 
|                                                                  | Intangible assets                                          |                      |       |                      | (2,466
|                                                                  | Accumulated other comprehensive income (loss)              |                      | (2,621 | )                    | (6,788
|                                                                  |                                                            |                      |        |                      |       
|Net liability (asset) recognized                                  |                                                            | (266                 | )      | (6,918               | )     
|                                                                  |                                                            |                      |        |                      |       

Assumptions.The measurement date for the Group's pension plan assets and obligations is principally December 31. The
measurement date for the Group's net periodic pension cost is principally January 1. Assumed discount rates and rates of increase in remuneration used in calculating the projected benefit
obligations together with long-term rates of return on plan assets vary according to the economic conditions of the country in which the pension plans are situated.

The
following assumptions were used to determine benefit obligations:

|                     |                                         | German Plans |     | Non-German Plans
|-------------------- | --------------------------------------- | ------------ | --- | ----------------
|
|Average assumptions: |                                         |              |     |                 
|                     | Discount rate                           |              | 5.3 |                 
|                     | Rate of long-term compensation increase |              | 3.0 |                 

The
following assumptions were used to determine net periodic pension cost:

|                              |                                                               | German Plans |     | Non-German Plans
|----------------------------- | ------------------------------------------------------------- | ------------ | --- | ----------------
|
|Weighted-average assumptions: |                                                               |              |     |                 
|                              | Discount rate                                                 |              | 5.8 |                 
|                              | Expected return on plan assets (at the beginning of the year) |              | 7.5 |                 
|                              | Rate of long-term compensation increase                       |              | 3.0 |                 

Expected Return on Plan Assets.The expected rate of return for U.S. plans is based on long-term actual portfolio
results, historical total market returns and an assessment of the expected returns for the asset classes in the portfolios. The assumptions are based on surveys of large asset portfolio managers and
peer group companies

F-55

---

of
future return expectations over the next ten years. Accordingly, negative returns during a one or two year period may not significantly change the historical long-term rate of return such as to
necessitate or warrant revision of the expected long-term rate of return.

A
similar process is implemented to determine the expected rate of return on plan assets for German Plans. Both capital market surveys as well as the expertise of major banks and
industry professionals are used to determine the expected rate of return on plan assets.

The
expected rate of return on plan assets set for 2001 and 2002 was 7.9% for German Plans. The expected rate of return on plan assets set for 2001 and 2002 was 10.1% and 10.1% for
non-German Plans (primarily U.S. Plans), respectively. During 2002, the Investment Committees described above decided to gradually shift the pension fund portfolio asset distribution
towards a mix more weighted with fixed income assets than in prior years, which by definition would modestly lower return expectations. In addition, at that time, the Investment Committees' analysis
of market trends caused management to believe that future long-term returns for equities and fixed income assets would be lower than the returns experienced over the previous
25 years.

Therefore,
the expected rates of return were lowered to 7.5% for German Plans and 8.5% for non-German Plans as of January 1, 2003.

For
2004 the expected rates of return on plan assets are identical with the rates applied in 2003.

Net Pension Cost

The components of net pension cost were for the years ended December 31, 2003, 2002 and 2001 as follows:

|                                    |                                           | 2003 |     | 2002   |     | 2001 |   
|----------------------------------- | ----------------------------------------- | ---- | --- | ------ | --- | ---- | --
|
|Service cost                        |                                           | 256  |     | 344    |     | 226  |   
|Interest cost                       |                                           | 632  |     | 1,397  |     | 629  |   
|Expected return on plan assets      |                                           | (509 | )   | (1,870 | )   | (595 | ) 
|Amortization of:                    |                                           |      |     |        |     |      |   
|                                    | Unrecognized net actuarial losses (gains) |      | 173 |        | 53  |      | 74
|                                    | Unrecognized prior service cost           |      |    |        | 287 |      |  
|                                    | Unrecognized net obligation               |      |    |        |    |      |  
|                                    |                                           |      |     |        |     |      |   
|Net periodic pension cost (benefit) |                                           | 552  |     | 211    |     | 334  |   
|                                    |                                           |      |     |        |     |      |   
|Settlement/curtailment loss         |                                           | 50   |     | 24     |     | 1    |   
|                                    |                                           |      |     |        |     |      |   
|Net pension cost (benefit)          |                                           | 602  |     | 235    |     | 335  |   
|                                    |                                           |      |     |        |     |      |   

Contributions

Employer contributions to the Group's defined benefit pension plans were [EURO]2,056 million and [EURO]1,428 million for the years ended
December 31, 2003 and 2002, respectively. The employer contribution to the Group's defined benefit pension plans is expected to approximate [EURO]1.5 billion in 2004, of which
[EURO]0.1 billion is estimated to be needed to satisfy minimum funding requirements and an additional [EURO]1.4 billion is expected to be contributed at the Group's discretion. The Group
anticipates that the expected 2004 employer contribution will comprise [EURO]1.5 billion in cash.

F-56

---

Estimated Future Pension Benefit Payments

Pension benefits pertaining to the Group's German and non-German plans were [EURO]527 million and [EURO]1,599 million, respectively
during 2003, and [EURO]506 million and [EURO]1,852 million, respectively during 2002. The total estimated future pension benefits to be paid by the Group's pension plans for the next
10 years approximates [EURO]21.2 billion and are expected to be paid as follows:

|(in billions of [EURO]) |  | 2004 |  | 2005 |  | 2006 |  | 2007 |  | 2008 |  | 2009- 2013
|----------------------- |  | ---- |  | ---- |  | ---- |  | ---- |  | ---- |  | ----------
|German Plans            |  | 0.4  |  | 0.5  |  | 0.5  |  | 0.5  |  | 0.6  |  | 3.5       
|Non-German Plans        |  | 1.5  |  | 1.5  |  | 1.5  |  | 1.5  |  | 1.6  |  | 7.6       

Accumulated Benefit Obligation

For all pension plans that have an accumulated benefit obligation in excess of plan assets, information pertaining to the accumulated benefit obligations and plan
assets are presented as follows:

|                                |  | At December 31,
|------------------------------- |  | ---------------
|
|Projected benefit obligations   |  | 31,487         
|Accumulated benefit obligations |  | 30,547         
|Plan assets                     |  | 25,660         

The
pre-tax decrease in the minimum pension liability in 2003 included in other comprehensive income (loss) was [EURO]662 million and in 2002 and 2001 there was an increase in the
minimum pension liability included in other comprehensive income (loss) of [EURO]10,022 million and [EURO]1,436 million for the years ended December 31, respectively.

Other Postretirement Benefits

Certain DaimlerChrysler operations in the U.S. and Canada provide postretirement health and life insurance benefits to their employees. Upon retirement from
DaimlerChrysler the employees may become eligible for continuation of these benefits. The benefits and eligibility rules may be modified.

Investment Policies and Strategies

At December 31, 2003, plan assets were invested in diversified portfolios that consisted primarily of debt and equity securities. Assets and income
accruing on all pension trust and relief funds are used solely to pay benefits and administer the plans. The Group's other benefit plan asset allocation at December 31, 2003 and 2002, and
target allocations for 2004 are as follows:

(in % of plan assets)

2004 planned

2003

2002Equity securities

65

68

62Debt securities

35

32

37Real estate





Other





1


Asset
allocation is based on a Benchmark Portfolio designed to diversify investments among the following primary asset classes: U.S. Equity, International Equity and U.S. Fixed Income.
The objective of the Benchmark Portfolio is to achieve a reasonable balance between risk and return.

F-57

---

The
investment process is overseen by Investment Committees which consist of senior financial management and other appropriate executives. The Investment Committees meet regularly to
approve the asset allocations and review the risks and results of the funds and approve the selection and retention of external managers of specific portfolios.

The
majority of investments reflects the asset classes designated by the Benchmark Portfolio. To maintain a wide range of diversification and improve return possibilities, a small
percentage of assets (approximately 5%)
is allocated to highly promising markets such as High Yield Debt and Emerging Markets. Internal controlling units monitor all investments. External depositary banks provide safekeeping of securities
as well as reporting of transactions and assets.

Funded Status

The following information is presented with respect to the Group's postretirement benefit plans:

At December 31,(in millions of [EURO])

2003

2002Change in accumulated postretirement benefit obligations:Accumulated postretirement benefit obligations at beginning of year

15,933

15,095Foreign currency exchange rate changes

(2,553
)
(2,454
)Service cost

278

262Interest cost

983

1,062Plan amendments

(383
)
(90
)Actuarial losses

1,242

2,863Settlement/curtailment loss

11

59Acquisitions and other

198

7Benefits paid

(799
)
(871
)Accumulated postretirement benefit obligations at end of year

14,910

15,933Change in plan assets:Fair value of plan assets at beginning of year

2,232

2,982Foreign currency exchange rate changes

(490
)
(447
)Actual gains (losses) on plan assets

379

(294
)Employer contributions (withdrawals)

(673
)
1Dispositions/acquisitions

137

Benefits paid

(54
)
(10
)Fair value of plan assets at end of year

1,531

2,232


F-58

---

A
reconciliation of the funded status, which is the difference between the accumulated postretirement benefit obligations and the fair value of plan assets, to the liability recognized
for accrued postretirement health and life insurance benefits in pension plans and similar obligations is as follows:

At December 31,(in millions of [EURO])

2003

2002Funded status

13,379

13,701Amounts not recognized:Unrecognized actuarial net losses

(5,114
)
(4,979
)Unrecognized prior service cost

(62
)
(555
)Net liability recognized

8,203

8,167


The
impact of the Medical Drug Act, which became law in December 2003 and was published on January 12, 2004, was not taken into account by DaimlerChrysler in 2003, as there
were no final guidelines on the part of the FASB in 2003 on the treatment of the impact in the balance sheet and the statement of earnings. On the basis of actuarial estimates, the Medical Drug Act
will result in an overall reduction of the obligations for the postretirement health and life insurance benefits amounting to approximately [EURO]0.7 billion.

Contributions

DaimlerChrysler did not make any contributions to its other postretirement plans in 2003 (2002: [EURO]1 million). DaimlerChrysler does not plan to make any
contributions in 2004. In 2003 DaimlerChrysler transferred [EURO]0.7 billion from the VEBA-Trust to the non-German pension plan assets.

Assumptions

Assumed discount rates and rates of increase in remuneration used in calculating the accumulated postretirement benefit obligations together with
long-term rates of return on plan assets vary according to the economic conditions of the country in which the plans are situated.

The
average assumptions used to determine the benefit obligations of the Group's postretirement benefit plans at December 31, were as follows (in %):

2003

2002

2001Average assumptions:Discount rate

6.3

6.8

7.4Health care inflation rate in following (or "base") year

8.0

10.0

6.9Ultimate health care inflation rate (2008)

5.0

5.0

5.0


The
average assumptions used to determine the net periodic postretirement benefit cost of the Group's postretirement benefit plans for the years ended December 31, were as follows
(in %):

2003

2002

2001Average assumptions:Discount rate

6.8

7.4

7.7Expected return on plan assets (at the beginning of year)

8.5

10.5

10.4Health care inflation rate in following (or "base") year

10.0

6.9

7.5Ultimate health care inflation rate (2008)

5.0

5.0

5.0


F-59

---

U.S.
postretirement benefit plan assets utilize an asset allocation substantially similar to that of the pension assets. The expected rate of return, therefore, is the same for both
pension and postretirement benefit plan asset portfolios. Accordingly, the information about the expected rate of return on pension plan assets, described above, also applies to postretirement plan
assets.

Assumed
health care cost trend rates have a significant effect on the amounts reported for the Group's health care plans. The following schedule presents the effects of a
one-percentage-point change in assumed health care cost trend rates:

(in millions of [EURO])

1-Percentage-
Point Increase

1-Percentage-
Point DecreaseEffect on total of service and interest cost components

180

(153
)Effect on accumulated postretirement benefit obligations

1,716

(1,564
)


For
2004 the expected rate of return on plan assets is identical with the rate applied in 2003.

Net Postretirement Benefit Cost

The components of net periodic postretirement benefit cost for the years ended December 31, 2003, 2002 and 2001 were as follows:

|(in millions of [EURO])                  |                                           | 2003  |     | 2002  |    | 2001  |   
|---------------------------------------- | ----------------------------------------- | ----- | --- | ----- | -- | ----- | --
|Service cost                             |                                           | 278   |     | 262   |    | 257   |   
|Interest cost                            |                                           | 983   |     | 1,062 |    | 1,033 |   
|Expected return on plan assets           |                                           | (217  | )   | (345  | )  | (346  | ) 
|Amortization of:                         |                                           |       |     |       |    |       |   
|                                         | Unrecognized net actuarial losses (gains) |       | 220 |       | 38 |       | (7
|                                         | Unrecognized prior service cost           |       | 24  |       | 76 |       | 82
|                                         |                                           |       |     |       |    |       |   
|Net periodic postretirement benefit cost |                                           | 1,288 |     | 1,093 |    | 1,019 |   
|                                         |                                           |       |     |       |    |       |   
|Settlement/curtailment loss              |                                           | 2     |     | 26    |    | 154   |   
|                                         |                                           |       |     |       |    |       |   
|Net postretirement benefit cost          |                                           | 1,290 |     | 1,119 |    | 1,173 |   
|                                         |                                           |       |     |       |    |       |   

Estimated Future Postretirement Benefit Payments

Postretirement benefits paid pertaining to the Group's plans were [EURO]799 million and [EURO]871 million during 2003 and 2002, respectively. The
total estimated future postretirement benefits to be paid by the Group's plans for the next 10 years approximate [EURO]9.3 billion and are expected to be paid as follows:

|(in billions of [EURO])       |  | 2004 |  | 2005 |  | 2006 |  | 2007 |  | 2008 |  | 2009-
2013
|----------------------------- |  | ---- |  | ---- |  | ---- |  | ---- |  | ---- |  | ----------
|Other postretirement benefits |  | 0.7  |  | 0.8  |  | 0.9  |  | 0.9  |  | 0.9  |  | 5.1       

Prepaid Employee Benefits

In 1996, DaimlerChrysler established a Voluntary Employees' Beneficiary Association ("VEBA") trust for payment of non-pension employee benefits. At
December 31, 2003 and 2002, the VEBA had a balance of [EURO]2,017 million and [EURO]2,833 million, respectively, of which [EURO]1,433 million and
[EURO]2,140 million, respectively, were

F-60

---

designated
and restricted for the payment of postretirement health care benefits. No contributions to the VEBA trust were made in 2003, 2002 and 2001.

b)    Other Accrued Liabilities

Other accrued liabilities consisted of the following:

|                                   |  | At December 31,
|---------------------------------- |  | ---------------
|
|Product guarantees                 |  | 9,230          
|Accrued sales incentives           |  | 5,119          
|Accrued personnel and social costs |  | 2,282          
|Restructuring measures             |  | 410            
|Other                              |  | 5,870          
|                                   |  |                
|                                   |  | 22,911         
|                                   |  |                

The
Group issues various types of product guarantees under which it generally guarantees the performance of products delivered and services rendered for a certain period or term (see
Note 31). The accrued liability for these product guarantees covers expected costs for legally and contractually obligated warranties as well as expected costs for policy coverage, recall
campaigns and buyback commitments. The liability for buyback commitments represents the expected costs related to the Group's obligation, under certain conditions, to repurchase a vehicle from a
customer. Buybacks may occur for a number of reasons including litigation, compliance with laws and regulations in a particular region and customer satisfaction issues.

The
changes in provisions for those product guarantees are summarized as follows:

(in millions of [EURO])Balance at January 1, 2002

9,379Currency change

(1,059
)Utilizations

(4,515
)Changes from product guarantees issued in 2002

5,575Changes from prior period product guarantees issued

(27
)Balance at December 31, 2002

9,353Currency change

(776
)Utilizations

(4,581
)Changes from product guarantees issued in 2003

5,364Changes from prior period product guarantees issued

(130
)Balance at December 31, 2003

9,230


The
amount included in the line item "changes from product guarantees issued in 2003" represents the amount of guaranty expense recognized in 2003 for products sold in 2003.

F-61

---



The Group also offers customers the opportunity to purchase separately priced extended warranty and maintenance contracts. The revenue from these contracts is
deferred at the inception of the contract and recognized into income over the contract period in proportion to the costs expected to be incurred based on historical information. Included in "Deferred
income" on the Consolidated Balance Sheets, the deferred revenue from these contracts is summarized as follows:

(in millions of [EURO])Balance at January 1, 2002

1,191Currency change

(190
)Deferred revenue current year

574Earned revenue current year

(514
)Balance at December 31, 2002

1,061Currency change

(170
)Deferred revenue current year

693Earned revenue current year

(455
)Balance at December 31, 2003

1,129


Accruals
for restructuring measures comprise certain employee termination benefits and costs which are directly associated with plans to exit specified activities. The changes in these
provisions are summarized as follows:

|(in millions of [EURO])                     |  | Termination
benefits |   | Exit costs |   | Total
liabilities |  
|------------------------------------------- |  | -------------------- | - | ---------- | - | ----------------- | -
|Balance at January 1, 2001                  |  | 151                  |   | 109        |   | 260               |  
|Utilizations, transfers and currency change |  | (947                 | ) | (275       | ) | (1,222            | )
|Reductions                                  |  | (135                 | ) | (144       | ) | (279              | )
|Additions                                   |  | 1,504                |   | 927        |   | 2,431             |  
|                                            |  |                      |   |            |   |                   |  
|Balance at December 31, 2001                |  | 573                  |   | 617        |   | 1,190             |  
|                                            |  |                      |   |            |   |                   |  
|Utilizations, transfers and currency change |  | (461                 | ) | (358       | ) | (819              | )
|Reductions                                  |  | (57                  | ) | (39        | ) | (96               | )
|Additions                                   |  | 323                  |   | 160        |   | 483               |  
|                                            |  |                      |   |            |   |                   |  
|Balance at December 31, 2002                |  | 378                  |   | 380        |   | 758               |  
|                                            |  |                      |   |            |   |                   |  
|Utilizations, transfers and currency change |  | (355                 | ) | (209       | ) | (564              | )
|Reductions                                  |  | (10                  | ) | (27        | ) | (37               | )
|Additions                                   |  | 226                  |   | 27         |   | 253               |  
|                                            |  |                      |   |            |   |                   |  
|Balance at December 31, 2003                |  | 239                  |   | 171        |   | 410               |  
|                                            |  |                      |   |            |   |                   |  

In
connection with the Group's restructuring measures, provisions were recorded in 2003 for termination benefits principally within Chrysler Group (see Note 7), and in 2002 and
2001 principally within Chrysler Group (see Note 7) and Commercial Vehicles, especially within Freightliner (see Note 5).

Additions
to accruals for termination benefits in 2003 amounted to [EURO]226 million (2002: [EURO]323 million; 2001: [EURO]1,504 million). The amount recorded in
2003 was primarily related to the Chrysler Group's turnaround plan, which was initiated in 2001.

F-62

---

In
2003, new restructuring measures of [EURO]7 million were initiated in the Commercial Vehicles segment. These measures were related to one-time termination benefits
in connection with capacity adjustments in the U.S. The amount is presented as additions to accruals for termination benefits in the income statement under item "Other expenses."

Termination
benefits of [EURO]229 million were paid in 2003 (2002: [EURO]431 million; 2001: [EURO]269 million), of which [EURO]228 million (2002:
[EURO]359 million; 2001: [EURO]227 million) were charged against previously established liabilities.

In
connection with these restructuring efforts, the Group effected in 2003 workforce reductions of approximately 4,410 employees (2002: 11,500; 2001: 17,700). At December 31,
2003, the Group had liabilities for estimated future terminations of approximately 1,100 employees.

Additions
to the accruals for exit costs of [EURO]27 million in 2003 and most of the accruals for exit costs in 2002 and 2001 ([EURO]302 million and
[EURO]488 million, respectively) were related to supplier contract cancellation and facility deactivation costs in connection with the termination of production activities and product programs
within the Chrysler Group (see Note 7). The Commercial Vehicles segment accrued [EURO]62 million in exit costs in 2002, which were related largely to costs associated with dealer
contract terminations in the U.S. and France. The exit costs of [EURO]111 million in 2001 were incurred as a result of lease terminations as well as terminations of selected supplier
arrangements and dealer contracts. Minor amounts accrued in 2002 and 2001 were related to several restructuring programs within the Other Activities segment.

The
payments for exit costs amounted to [EURO]174 million in 2003 (2002: [EURO]288 million; 2001: [EURO]290 million), of which [EURO]167 million (2002:
[EURO]258 million; 2001: [EURO]155 million) were charged against previously established liabilities.

F-63

---

26. Financial Liabilities

|                                                                                                                              |  |           |  | At December 31,
|----------------------------------------------------------------------------------------------------------------------------- |  | --------- |  | ---------------
|
|Short-term:                                                                                                                   |  |           |  |                
|Notes/Bonds                                                                                                                   |  | 9,975     |  | 12,971         
|Commercial paper                                                                                                              |  | 7,048     |  | 9,494          
|Liabilities to financial institutions                                                                                         |  | 6,183     |  | 5,593          
|Liabilities to affiliated companies                                                                                           |  | 344       |  | 339            
|Deposits from direct banking business                                                                                         |  | 3,041     |  | 768            
|Loans, other financial liabilities                                                                                            |  | 475       |  | 200            
|Liabilities from capital lease and residual value guarantees                                                                  |  | 1,189     |  | 1,134          
|                                                                                                                              |  |           |  |                
|Short-term financial liabilities (due within one year)                                                                        |  | 28,255    |  | 30,499         
|                                                                                                                              |  |           |  |                
|
|Notes/Bonds
of which due in more than five years [EURO]11,213 (2002: [EURO]11,492)                                            |  | 2005-2097 |  | 37,802         
|Liabilities to financial institutions
of which due in more than five years [EURO]1,812 (2002: [EURO]1,911)                    |  | 2005-2020 |  | 7,911          
|Liabilities to affiliated companies
of which due in more than five years
[EURO] (2002: [EURO])                              |  |           |  |               
|Deposits from direct banking business
of which due in more than five years
[EURO]22 (2002: [EURO])                           |  |           |  | 97             
|Loans, other financial liabilities
of which due in more than five years
[EURO]13 (2002: [EURO]28)                             |  |           |  | 400            
|Liabilities from capital lease and residual value guarantees
of which due in more than five years
[EURO]207 (2002: [EURO]249) |  |           |  | 1,225          
|                                                                                                                              |  |           |  |                
|Long-term financial liabilities                                                                                               |  |           |  | 47,435         
|                                                                                                                              |  |           |  |                
|                                                                                                                              |  |           |  | 75,690         
|                                                                                                                              |  |           |  |                

Weighted
average interest rates for notes/bonds, commercial paper and liabilities to financial institutions are 6.04%, 1.84% and 3.51%, respectively, at
December 31, 2003.

Commercial
papers are primarily denominated in euros and U.S. dollars and include accrued interest. Liabilities to financial institutions are partly secured by mortgage conveyance, liens
and assignment of receivables of approximately [EURO]1,714 million (2002: [EURO]1,754 million).

DaimlerChrysler
Corporation ("DCC") maintains a Trade Payables Agreement with General Electric Capital Corporation ("GECC") to provide financial flexibility to DCC and its suppliers.
GECC pays participating suppliers on accelerated payment terms in exchange for a discount on the invoiced amount. DCC then pays GECC under the terms of the original invoice from the supplier. To the
extent GECC can realize favorable economics from the transactions, they are shared with DCC. The outstanding balance due GECC at December 31, 2003 and 2002, was [EURO]416 million and
[EURO]171 million, respectively, shown within other short term financial liabilities in the table above.

F-64

---

Aggregate
nominal amounts of financial liabilities maturing during the next five years and thereafter are as follows:

|(in millions of [EURO]) |  | 2004   |  | 2005   |  | 2006   |  | 2007  |  | 2008  |  | thereafter
|----------------------- |  | ------ |  | ------ |  | ------ |  | ----- |  | ----- |  | ----------
|Financial liabilities   |  | 27,949 |  | 14,551 |  | 11,116 |  | 3,624 |  | 4,581 |  | 12,831    

At
December 31, 2003, the Group had unused short-term credit lines of [EURO]10,700 million (2002: [EURO]11,026 million) and unused long-term
credit lines of [EURO]10,441 million (2002: [EURO]10,597 million). The credit lines include an $18 billion revolving credit facility with a syndicate of international banks. The
credit agreement is comprised of a multi-currency revolving credit facility which allows DaimlerChrysler AG and several subsidiaries to borrow up to $5 billion until 2006, an U.S. dollar
revolving credit facility which allows DaimlerChrysler North America Holding Corporation, a wholly-owned subsidiary of DaimlerChrysler AG, to borrow up to $6 billion available until 2004, and a
multi-currency revolving credit facility for working capital purposes which allows DaimlerChrysler AG and several subsidiaries to borrow up to $7 billion until 2008. A part of the
$18 billion facility serves as a back-up for commercial paper drawings.

27. Trade Liabilities

|                  |  | At December 31, 2003 |  | At December 31, 2002
|----------------- |  | -------------------- |  | --------------------
|
|Trade liabilities |  | 11,583               |  |                    

28. Other Liabilities

|                                    |  | At December 31, 2003 |  | At December 31, 2002
|----------------------------------- |  | -------------------- |  | --------------------
|
|Liabilities to affiliated companies |  | 316                  |  | 10                  
|Liabilities to related companies    |  | 131                  |  |                    
|Other liabilities                   |  | 8,358                |  | 699                 
|                                    |  |                      |  |                     
|                                    |  | 8,805                |  | 709                 
|                                    |  |                      |  |                     

As
of December 31, 2003, other liabilities include tax liabilities of [EURO]682 million (2002: [EURO]827 million) and social benefits due of [EURO]756 million
(2002: [EURO]782 million).

29. Deferred Income

As of December 31, 2003, [EURO]1,836 million of the total deferred income is to be recognized after more than one year (2002:
[EURO]1,989 million).

OTHER NOTES

30.   Litigation and Claims

Various legal proceedings are pending against the Group. DaimlerChrysler believes that such proceedings in the main constitute ordinary routine litigation
incidental to its business.

Various
legal proceedings pending against DaimlerChrysler's subsidiary DaimlerChrysler Corporation allege defects in various components (including occupant restraint systems, seats,
brake systems, ball joints and fuel

F-65

---

systems)
in several different vehicle models or allege design defects relating to vehicle stability (rollover propensity), pedal misapplication (sudden acceleration), brake transmission shift
interlock, or crashworthiness. Some of these proceedings are filed as class action lawsuits that seek repair or replacement of the vehicles or compensation for their alleged reduction in value, while
others seek recovery for personal injuries. Adverse decisions in these proceedings could require DaimlerChrysler Corporation to pay substantial compensatory and punitive damages, or undertake service
actions, recall campaigns or other costly actions.

Three
purported class action lawsuits are pending in various U.S. and Canadian courts that allege that the paint applied to 1982-1997 model year Chrysler, Plymouth,
Jeep® and Dodge vehicles delaminates, peels or chips as the result of defective paint, paint primer, or application processes. Plaintiffs seek compensatory and punitive damages, costs of
repair or replacement, attorneys' fees and costs. Seven other previously reported class action lawsuits regarding paint delamination have been dismissed.

Like
other companies in the automotive industry, DaimlerChrysler (primarily DaimlerChrysler Corporation) have experienced a growing number of lawsuits which seek compensatory and
punitive damages for illnesses alleged to have resulted from direct and indirect exposure to asbestos used in some vehicle components (principally brake pads). Typically, these suits name many other
corporate defendants and may also include claims of exposure to a variety of non-automotive asbestos products. A single lawsuit may include claims by multiple plaintiffs alleging illness
in the form of asbestosis, mesothelioma or other cancer or illness. The number of claims in these lawsuits increased from approximately 14,000 at the end of 2001 to approximately 28,000 at the end of
2003. In the majority of these cases, plaintiffs do not specify their alleged illness and provide little detail about their alleged exposure to components in DaimlerChrysler's vehicles. Some
plaintiffs do not exhibit current illness, but seek recovery based on potential future illness. In 2001, DaimlerChrysler and other automobile manufacturers asked the federal bankruptcy court in
Delaware overseeing the bankruptcy proceedings of an automotive supplier, Federal-Mogul Corporation, to consolidate all of the asbestos brake cases pending in state courts throughout the U.S. with the
asbestos brake litigation involving Federal Mogul supervised by the bankruptcy court. The Group believed that consolidation would reduce the cost and complexity of defending these individual cases. In
2002, the bankruptcy court decided that it did not have the authority to consolidate these cases, and the U.S. Court of Appeals upheld that decision. The U.S. Supreme Court in January 2003
denied DaimlerChrysler's request and that of other manufacturers to review the decision. DaimlerChrysler believes that many of these lawsuits involve unsubstantiated illnesses or assert only tenuous
connections with components in its vehicles, and that there is credible scientific evidence to support the dismissal of many of these claims. Although DaimlerChrysler's expenditures to date in
connection with such claims have not been material to its financial condition, it is possible that the number of these lawsuits will continue to grow, especially those alleging
life-threatening illness, and that the company could incur significant costs in the future in resolving these lawsuits.

As
previously reported, the Antitrust Division of the U.S. Department of Justice, New York Regional Office, opened a criminal investigation in connection with the allegations made in a
lawsuit filed in 2002 in the United States District Court for the District of New Jersey against DaimlerChrysler's subsidiary
Mercedes-Benz USA, LLC ("MBUSA"), and its wholly-owned subsidiary Mercedes-Benz Manhattan, Inc. The Department of Justice advised those companies in the third quarter of
2003 that it had closed the investigation and will take no further action. The lawsuit, certified as a class action in 2003, alleges that those companies participated in a price fixing conspiracy
among Mercedes-Benz dealers. MBUSA and Mercedes-Benz Manhattan will continue to defend themselves vigorously.

As
previously reported, DaimlerChrysler received a "statement of objections" from the European Commission on April 1, 1999, which alleged that the Group violated EC competition
rules by impeding cross-border sales of Mercedes-Benz passenger cars to final customers in the European Economic Area. In October 2001, the European Commission found that
DaimlerChrysler infringed EC competition rules and imposed a fine of

F-66

---

approximately
[EURO]72 million. DaimlerChrysler's appeal against this decision is still pending before the European Court of Justice.

As
previously reported, in 2003 approximately 80 purported class action lawsuits alleging violations of antitrust law were filed against DaimlerChrysler and several of its U.S.
subsidiaries, six other motor vehicle manufacturers, operating subsidiaries of those companies in both the United States and Canada, the National Automobile Dealers Association and the Canadian
Automobile Dealers Association. Some complaints were filed in federal courts in various states and others were filed in state courts. The complaints allege that the defendants conspired to prevent the
sale to U.S. consumers of vehicles sold by dealers in Canada in order to maintain new car prices at artificially high levels in the U.S. They seek treble damages on behalf of everyone who bought or
leased a new vehicle in the U.S. since January 1, 2001. DaimlerChrysler believes the complaints against it are without merit and plans to defend itself against them vigorously.

As
previously reported, DaimlerChrysler's subsidiary, DaimlerChrysler Services North America LLC ("DCSNA") is subject to various legal proceedings in federal and state courts, some of
which allege violations of state and federal laws in connection with financing motor vehicles. Some of these proceedings seek class action status, and may ask for compensatory, punitive or treble
damages and attorneys' fees. In October 2003, the Civil Rights Division of the Department of Justice and the United States Attorney's Office for the Northern District of Illinois advised that
they are initiating an investigation of DCSNA's credit practices that focuses on DCSNA's Chicago Zone Office. The investigation follows a lawsuit filed in February, 2003 against DCSNA in Chicago with
the United States District Court for the Northern District of Illinois that alleges that the DCSNA Chicago Zone Office engaged in racially discriminatory credit and collection practices in violation
of federal and state laws. In that lawsuit, six individuals filed a purported class action complaint on behalf of African-Americans in the region alleging that they were denied vehicle financing based
on race. They seek compensatory and punitive damages, and injunctive relief barring discriminatory practices. The lawsuit was later amended to include Hispanic-Americans. DCSNA believes that its
practices are fair and not discriminatory. DCSNA intends to defend itself vigorously against these claims.

As
a member of a consortium that has agreed to develop, install and operate a toll collection system for German highways, the affiliate of DaimlerChrysler, DaimlerChrysler Services and
the other consortium members have received a claim for damages from the Federal Republic of Germany. The government is seeking reimbursement of revenues lost due to the delay in completion of the
system. The Federal Republic of Germany is claiming [EURO]156 million per month from September 1 through December 31, 2003, and [EURO]180 million per month thereafter. The
Federal Republic of Germany is also seeking contractual penalties of approximately [EURO]680 million, based on a claim that the consortium members did not obtain the government's consent before
entering into several sub-suppliers contracts. In addition the Federal Republic of Germany is claiming other time-dependent contractual penalties. DaimlerChrysler believes the
government's claims are without merit and DaimlerChrysler intends to defend itself vigorously against these claims. The agreement between the consortium members and the Federal Republic of Germany
calls for submission of all disputes related to the toll collection system to arbitration. The Federal Republic of Germany has clearly indicated that it will submit these claims for arbitration.

As
reported in DaimlerChrysler's Annual Report as of December 31, 2002, Freightliner LLC, DaimlerChrysler's North American commercial vehicles subsidiary, acquired in
September 2000 Western Star Trucks Holdings Ltd., a Canadian company engaged in the design, assembly, and distribution of heavy duty trucks and transit buses. Prior to its acquisition by
Freightliner, Western Star had completed the sale of ERF (Holdings) plc, a company organized in England and Wales and engaged in the assembly and sale of heavy duty trucks, to MAN AG and MAN
Nutzfahrzeuge AG for CAD195 million. In September 2002, MAN filed a claim against Freightliner Ltd. (formerly Western Star) with the London Commercial Court for breach of
representations and warranties in the share purchase agreement, alleging that ERF's accounts and financial statements were misstated. MAN seeks damages in excess of GBP300 million.
Freightliner Ltd. intends to defend itself vigorously

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against
such claims and has filed a contribution claim against Ernst & Young, ERF's auditors, with the London Commercial Court in the second quarter of 2003.

As
previously reported, on April 30, 2001, DaimlerChrysler sold its subsidiary, DaimlerChrysler Rail Systems GmbH (also known as Adtranz) to Bombardier, Inc. for cash
consideration of $725 million. In July 2002, Bombardier filed a request for arbitration with the International Chamber of Commerce in Paris, and asserted claims for sales price
adjustments under the terms of the sale and purchase agreement as well as claims for alleged breaches of contract and misrepresentations. Bombardier seeks total damages of approximately
[EURO]960 million. The agreement limits the amount of such price adjustments to [EURO]150 million, and, to the extent legally permissible, the amount of other claims to an additional
[EURO]150 million. The Group continues defending against such claims vigorously (see Note 4).

In
the fourth quarter of 2000, Tracinda Corporation filed a lawsuit in the United States District Court for the District of Delaware against DaimlerChrysler AG and some of the members of
its Supervisory Board and Board of Management (Messrs. Kopper, Prof. Schrempp and Dr. Gentz). Shortly thereafter, other plaintiffs filed a number of actions against the same defendants,
making claims similar to those in the Tracinda complaint. Two individual lawsuits and one consolidated class action lawsuit were originally pending. The plaintiffs, current or former DaimlerChrysler
shareholders, alleged that the defendants violated U.S. securities law and committed fraud in obtaining approval from Chrysler stockholders of the business combination between Chrysler and
Daimler-Benz in 1998. The consolidated class action complaint contained additional allegations that were later dismissed. In March 2003, the Court granted Mr. Kopper's motion
to dismiss each of the complaints against him on the ground that the Court lacked jurisdiction over him. In February 2003, the DaimlerChrysler defendants filed motions seeking summary judgment
on all claims in the cases on several grounds, including that the claims are barred by the statute of limitations. In June 2003, the Court denied defendants' motion relating to the statute of
limitations. In August 2003, DaimlerChrysler agreed to settle the consolidated class action case for $300 million (approximately [EURO]240 million adjusted for currency effects),
and shortly thereafter, DaimlerChrysler concluded a settlement with Glickenhaus, one of the two individual plaintiffs. On February 5, 2004, the Court issued a final order approving the
settlement of the consolidated class action case and ordering its dismissal. The settlements did not affect the case brought by Tracinda, which claims to have suffered damages in the range of
$856 million to $1.28 billion. In November 2003, the Court denied the remaining aspects of defendants' motion for summary judgment. The Tracinda case went to trial in
December 2003 and continued for approximately two weeks. Trial of the case was suspended with approximately two days of trial time remaining while the parties addressed a discovery issue in a
separate hearing. The trial reconvened on February 9, 2004, and was completed February 11, 2004. It is difficult to predict when the Court might render a decision, although
DaimlerChrysler doubts it will be before the fourth quarter of 2004.

As
previously reported, in 2002 several lawsuits were filed asserting claims relating to the practice of apartheid in South Africa before 1994. More specifically, on November 11,
2002, the Khulumani Support Group (which purports to represent 32,700 individuals) and several individual plaintiffs filed a lawsuit captioned Khulumani v. Barclays National Bank Ltd., Civ. A.
No. 02-5952 (E.D.N.Y.) in the United States District Court for the Eastern District of New York against 22 American, European and Japanese companies, including DaimlerChrysler AG
and Daimler-Benz Industrie. The lawsuit purports to relate to the period from 1960 to 1993. On November 19, 2002, another putative class action lawsuit, Ntsebeza v.
Holcim Ltd., No. 02-74604 (RWS) (E.D. Mich.), was filed in the United States District Court for the Eastern District of Michigan against four American and European companies,
including DaimlerChrysler Corporation, and purports to cover the period from 1948 to 1993. Both cases were consolidated for pretrial purposes with several other putative class action lawsuits,
including Digwamaje v. Bank of America, No. 02-CV-6218 (RCC) (S.D.N.Y.), which had been previously filed in the United States District Court for the Southern District of
New York. The Digwamaje plaintiffs originally named DaimlerChrysler AG as a defendant, but later voluntarily dismissed DaimlerChrysler from the suit. Khulumani and

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Ntsebeza
allege, in essence, that the defendants knew about or participated in human rights violations and other abuses of the South African apartheid regime, cooperated with the apartheid government
during that period, and benefited financially from such cooperation. Plaintiffs' legal theories include conspiracy, aiding and abetting violations of international law, unjust enrichment, and unfair
and discriminatory labor practices. The plaintiffs seek, among other things, declaratory relief, compensatory and punitive damages, attorneys' fees and costs, the disgorgement of purported illicit
profits, an accounting, restitution of the value of defendants' purported unjust enrichment, a constructive trust, and the establishment of an "independent historic commission." The plaintiffs do not
quantify damages. On July 14, 2003, a group of defendants named in one or more of the consolidated lawsuits, including Khulumani and Ntsebeza, filed a motion to dismiss the complaints. The
motion was argued on November 6, 2003, and is currently pending before the Court. DaimlerChrysler intends to continue to defend itself vigorously in these suits.

Litigation
is subject to many uncertainties, and DaimlerChrysler cannot predict the outcome of individual matters with assurance. It is reasonably possible that the final resolution of
some of these matters could require the Group to make expenditures, in excess of established reserves, over an extended period of time and in a range of amounts that DaimlerChrysler cannot reasonably
estimate. Although the final resolution of any such matters could have a material effect on the Group's consolidated operating results for a particular reporting period, DaimlerChrysler believes that
it should not materially affect its consolidated financial position.

31. Contingent Obligations and Commercial Commitments

Contingent Obligations.Obligations from issuing guarantees as a guarantor (excluding product warranties) are as follows:

|                                               |  | At December 31,
|---------------------------------------------- |  | ---------------
|
|
|Guarantees for third party liabilities         |  | 2,647          
|Guarantees under buy-back commitments          |  | 1,957          
|Performance guarantees and environmental risks |  | 513            
|Other                                          |  | 118            
|                                               |  |                
|                                               |  | 5,235          
|                                               |  |                

Guarantees
for third party liabilities principally represent guarantees of indebtedness of non-consolidated affiliated companies and third parties and commitments by Group
companies as to contractual performance by joint venture companies and certain non-incorporated companies, partnerships, and project groups. The term under these arrangements generally
covers the range of the related indebtedness of the non-consolidated affiliated companies and third parties or the contractual performance period of joint venture companies,
non-incorporated companies, partnerships, and project groups. The parent company of the Group (DaimlerChrysler AG) provides guarantees for certain obligations of its consolidated
subsidiaries towards third parties. At December 31, 2003, these guarantees amounted to [EURO]51.5 billion. To a lesser extent, consolidated subsidiaries provide guarantees to third
parties of obligations of other consolidated subsidiaries. All intercompany guarantees are eliminated in consolidation and therefore are not reflected in the above table.

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Guarantees under buy-back commitments principally represent arrangements whereby the Group guarantees specified trade-in values for assets
or products sold to non-consolidated affiliated companies and third parties. Such guarantees provide the holder with the right to return purchased assets or products back to the Group in
connection with a future purchase of products or services. The table above excludes residual value guarantees related to arrangements for which revenue recognition is precluded due to the Group's
obligation to repurchase assets sold to unrelated guaranteed parties.

Performance
guarantees principally represent pledges or indemnifications related to the quality or timing of performance by third parties or participations in performance guarantees of
consortiums. Performance guarantees typically provide the purchaser of goods or services with the right to be reimbursed for losses incurred or other penalties if the third party or the consortium
fails to perform. Amounts accrued under performance guarantees reflect estimates of probable losses resulting from a third party's failure to perform under obligating agreements.

As
described in more detail in Note 3 the Group holds a 45% equity ownership interest in Toll Collect GmbH and has guaranteed, on a joint and several basis with the other equity
holders (collectively the "Consortium", individually the "Partners"), certain current and future obligations of Toll Collect.

Pursuant
to the Operating Agreement, the Partners have guaranteed, on a joint and several basis, the successful completion and operation of the toll collection system by Toll Collect
until August 31, 2004.

In
addition, the partners of Toll Collect, on a joint and several basis, have the obligation to fund Toll Collect in order to maintain an equity ratio of Toll Collect of 20% (based on
German GAAP) until August 31, 2004, and 15% thereafter ("Equity Maintenance Undertaking") until the Operating Agreement expires. These funding requirements would be triggered by, among other
events, losses incurred by Toll Collect due to a further delay in the start of the operation of the toll collection system. The start of operations was initially scheduled for August 31, 2003,
but has been delayed.

In
the event the toll collection system is not operational in time the partner of the consortium or the operating company are liable to pay penalties pursuant to the Operating Agreement.
As the system is not operating yet, the partners started to pay penalties on December 2, 2003. (As Toll Collect did not join to the Operating Agreement, Toll Collect is not obligated under the
contract yet.)

The
contractual penalties amount to [EURO]250,000 per day until the end of February 2004 and will increase to [EURO]500,000 per day thereafter. Beside these penalties, in our
opinion, the Operating Agreement provides for exclusion of any further penalties or liabilities for fault.

Further
funding requirements could arise during the operational phase after having obtained the preliminary operating permit through additional penalties or reductions in compensation
Toll Collect may be exposed to in the event that in a particular case certain contractual obligations are violated or the toll collection system does not operate effectively after the completion of
the system. These penalties are limited during the first nine months following the issuance of the preliminary operating permit, to an aggregate of [EURO]56.25 million, then to
[EURO]150 million per annum until the issuance of the final operating permit, and thereafter to [EURO]100 million per annum, with these amounts being increased by 3% per business year of
operation. For reductions in compensation the same system of limitations does apply. In case of an intentional violation of contractual duties within the operational phase, the Federal Republic of
Germany would be entitled to claim  without any limitation  further damages from Toll Collect. If such penalties, reductions in compensations and other events
eventually result in an equity ratio below the ratio agreed upon in the Equity Maintenance Undertaking, the partners are obligated to fund operations to an extent that is sufficient to reach those
equity levels.

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The
operating agreement can be terminated by both sides in the case of a violation of specified substantial contractual obligations (such as a failure to meet deadlines or other
requirements or a neglect of duties of cooperation). The party concerned has the right to remove the reasons for termination within an appropriate time.

Until
funds become available through the operating performance of the toll collection system, Toll Collect will continue to require capital through bridge loans provided by various
banks. These loans are guaranteed by DaimlerChrysler AG on a several and independent basis to the extent of the Group's 45% equity interest in Toll Collect. For these guarantees, DaimlerChrysler AG
receives market equivalent remuneration from Toll Collect.

Only
the guarantee for the bridge loan is included in the above table. The maximum potential future obligations resulting from the remaining guarantees provided for Toll Collect's
Obligations have not been included in the above table because those amounts cannot be reasonably estimated.

On
March 11, 2003, DaimlerChrysler signed an agreement with the City of Hamburg, Germany, a holder of approximately 6% of the common shares of DaimlerChrysler Luft-
und Raumfahrt Holding Aktiengesellschaft ("DCLRH"), a majority-owned subsidiary of the Group. Pursuant to the terms of the agreement and upon execution of the agreement, DaimlerChrysler will have a
call option and the City of Hamburg will have a put option which, upon exercise by either party, will require the shares of DCLRH held by the City of Hamburg to be transferred to DaimlerChrysler. In
consideration for these shares, DaimlerChrysler will pay the City of Hamburg a minimum of [EURO]450 million in cash or shares of the European Aeronautic Defence and Space Company EADS N.V.
("EADS") or a combination of both. The agreement was approved by the Parliament of the Free and Hanseatic City of Hamburg on May 21, 2003. DaimlerChrysler's call option would become exercisable
at January 1, 2005. The City of Hamburg's put option would become exercisable at the earlier of October 1, 2007, or upon the occurrence of certain events which are solely within the
control of DaimlerChrysler. DaimlerChrysler believes the likelihood that these certain events will occur is remote.

The
Group is subject to potential liability under certain government regulations and various claims and legal actions that are pending or may be asserted against DaimlerChrysler
concerning environmental matters. The maximum potential future obligation related to certain environmental guarantees cannot be estimated due to numerous uncertainties including the enactment of new
laws and regulations, the development and application of new technologies, the identification of new sites for which the Group may have remediation responsibility and the apportionment and
collectibility of remediation costs when other parties are involved.

When
circumstances indicate that payment is probable, guarantees made by the Group are recognized as a liability in the consolidated balance sheet with an offsetting amount recorded as
an expense.

The
Group periodically initiates voluntary service actions and recall actions to address various customer satisfaction, safety and emissions issues related to vehicles it sells. The
Group records a liability for product warranty, including the estimated cost of these service and recall actions, when the related sale is recognized based on historical experience as to product
failures as well as current information on repair costs. The Group also enters into extended product warranty arrangements in consideration for a separate arrangement fee. The consideration received
in extended product warranty arrangements is deferred and amortized to revenue over the term of the extended warranty period. Costs related to extended product warranty services contracts are expensed
as incurred. The ultimate costs associated with product warranty arrangements cannot be estimated due to numerous uncertainties including the enactment of new laws and regulations, the number of
vehicles affected by service or recall actions, and the nature of the corrective action which may result in adjustments to the established liabilities (see Note 25b). In accordance with FIN 45,
the obligations associated with product warranties are not reflected in the above table.

Commercial Commitments.In addition to the above guarantees and warranties, in connection with certain production programs,
the Group has committed to purchase various levels of outsourced manufactured

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parts
and components over extended periods at market prices. The Group has also committed to purchase or invest in the construction and maintenance of various production facilities. Amounts under
these guarantees represent commitments to purchase plant or equipment at market prices in the future. As of December 31, 2003, commitments to purchase outsourced manufactured parts and
components or to invest in plant and equipment are approximately [EURO]8.8 billion. These amounts are not reflected in the above table.

The
Group also enters into noncancellable operating leases for facilities, plant and equipment. Total rentals under operating leases charged to expense in 2003 in the statement of income
(loss) amounted to [EURO]747 million (2002: [EURO]737 million; 2001: [EURO]819 million). Future minimum lease payments under noncancellable lease agreements as of
December 31, 2003 are as follows:

|(in millions of [EURO]) |  | 2004 |  | 2005 |  | 2006 |  | 2007 |  | 2008 |  | thereafter
|----------------------- |  | ---- |  | ---- |  | ---- |  | ---- |  | ---- |  | ----------
|Operating leases        |  | 554  |  | 334  |  | 267  |  | 206  |  | 189  |  | 918       

32. Information About Financial Instruments and Derivatives

a)     Use of Financial Instruments

The
Group conducts business on a global basis in numerous major international currencies and is, therefore, exposed to adverse movements in foreign currency exchange rates. The Group
uses among others bonds, medium-term-notes, commercial paper and bank loans in various currencies. As a consequence of using these types of financial instruments, the Group is
exposed to risks from changes in interest and foreign currency exchange rates. DaimlerChrysler holds financial instruments, such as financial investments, variable- and fixed-interest bearing
securities and to a minor extent equity securities that subject the Group to risks from changes in interest rates and market prices. DaimlerChrysler manages the various types of market risks by using
among others derivative financial instruments. Without these instruments the Group's market risks would be higher. DaimlerChrysler does not use derivative financial instruments for purposes other than
risk management.

Based
on regulations issued by regulatory authorities for financial institutions, the Group has established guidelines for risk controlling procedures and for the use of financial
instruments, including a clear segregation of duties with regard to operating financial activities, settlement, accounting and controlling.

Market
risks are quantified according to the "value-at-risk" method which is commonly used among banks. Using historical variability of market data, potential
changes in value resulting from changes of market prices are calculated on the basis of statistical methods.

To
a minor degree, DaimlerChrysler is also exposed to market price risks associated with the purchase of certain commodities. When we deem it necessary, DaimlerChrysler uses derivative
instruments to reduce this risk. The risk resulting from derivative commodity instruments is not significant to the Group.

b)     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. Fair values of financial instruments have been determined
with reference to available market information at the balance sheet date and the valuation methodologies discussed below. Considering the variability of their value-determining factors, the fair
values presented herein are only an indication of the amounts that the Group could realize under current market conditions.

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The
carrying amounts and fair values of the Group's financial instruments are as follows:

At December 31, 2003

At December 31, 2002(in millions of [EURO])

Carrying
amount

Fair
value

Carrying
amount

Fair
valueFinancial instruments (other than derivative instruments):Assets:Financial assets

1,631

1,631

1,870

1,870Receivables from financial services

52,638

53,919

52,088

52,622Securities

3,268

3,268

3,293

3,293Cash and cash equivalents

11,017

11,017

9,130

9,130Other receivables





5

5Liabilities:Financial liabilities

75,690

77,993

79,283

84,032Derivative instruments:Assets:Currency contracts

2,380

2,380

1,759

1,759Interest rate contracts

3,695

3,695

3,776

3,776Liabilities:Currency contracts

267

267

105

105Interest rate contracts

163

163

302

302


The
methods and assumptions used to determine the fair values of financial instruments are summarized below:

Financial Assets and Securities.The fair values of securities were estimated using quoted market prices. The Group has
certain equity investments in related and affiliated companies not presented in the table, as these investments are not publicly traded and determination of fair values is impracticable.

Receivables from Financial Services.The carrying amounts of variable rate finance receivables were estimated to approximate
their fair values since the contract rates of those receivables approximate current market rates. The fair values of fixed rate finance receivables were estimated by discounting expected cash flows
using the current interest rates at which comparable loans with identical maturity would be made as of December 31, 2003 and 2002.

The
carrying amounts of Cash and Other receivables approximate fair values due to the short-term maturities of these instruments.

Financial Liabilities.The fair value of publicly traded debt was estimated using quoted market prices. The fair values of
other long-term bonds were estimated by discounting future cash flows using market interest rates over the remaining term. The carrying amounts of commercial paper and borrowings under
revolving credit facilities were assumed to approximate fair value due to their short maturities.

Currency Contracts.The fair values of forward foreign exchange contracts were based on European Central Bank reference
exchange rates adjusted for the respective interest rate differentials (premiums or discounts). Currency options were valued on the basis of quoted market prices or on estimates based on option
pricing models.

Interest Rate Contracts.The fair values of existing instruments to hedge interest rate risks (e. g. interest rate swap
agreements, cross currency interest rate swap agreements) were estimated by discounting expected cash flows using market interest rates over the remaining term of the instrument. Interest rate options
are valued on the basis of quoted market prices or on estimates based on option pricing models.

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c)     Credit Risk

The
Group is exposed to credit-related losses in the event of non-performance by counterparties to financial instruments. DaimlerChrysler manages the credit risk exposure to
financial institutions through diversification of counterparties and review of each counterparties' financial strength. DaimlerChrysler does not have a significant exposure to any individual
counterparty, based on the rating of the counterparties performed by established rating agencies. DaimlerChrysler Services has established detailed guidelines for the risk management process related
to the exposure to financial services customers. Additional information with respect to receivables from financial services and allowance for doubtful accounts is included in Note 18.

d)     Accounting for and Reporting of Financial Instruments (Other than Derivative Instruments)

The
income or expense of the Group's financial instruments (other than derivative instruments), with the exception of receivables from financial services and financial liabilities
related to leasing and sales financing activities, is recognized in financial income, net. Interest income on receivables from financial services and gains and losses from sales of receivables are
recognized as revenues. Interest expense on financial liabilities related to leasing and sales financing activities are recognized as cost of sales. The carrying amounts of the financial instruments
(other than derivative instruments) are included in the consolidated balance sheets under their related captions.

e)     Accounting for and Reporting of Derivative Instruments and Hedging Activities

Foreign Currency Risk Management.As a consequence of the global nature of DaimlerChrysler's businesses, its operations and
its reported financial results and cash flows are exposed to the risks associated with fluctuations in the exchange rates of the U.S. dollar, the euro and other world currencies. The Group's
businesses are exposed to transaction risk whenever revenues of a business are denominated in a currency other than the currency in which the business incurs the costs relating to those revenues. This
risk exposure primarily affects the Mercedes Car Group segment. The Mercedes Car Group segment generates its revenues mainly in the currencies of the countries in which cars are sold, but it incurs
manufacturing costs primarily in
euros. The Commercial Vehicles segment is subject to transaction risk, to a lesser extent, because of its global production network. At Chrysler Group revenues and costs are principally generated in
U.S. dollars, resulting in a relatively low transaction risk for this segment. The Other Activities segment is exposed to transaction risk resulting primarily from the U.S. dollar exposure of the
aircraft engine business, which DaimlerChrysler conducts through MTU Aero Engines Group. Effective December 31, 2003 DaimlerChrysler sold all its equity interests in MTU Aero Engines Group.

In
order to mitigate the impact of currency exchange rate fluctuations, DaimlerChrysler continually assesses its exposure to currency risks and hedges a portion of those risks through
the use of derivative financial instruments. Responsibility for managing DaimlerChrysler's currency exposures and use of currency derivatives is centralized within the Group's Currency Committee.
Until the disposition of MTU Aero Engines Group, effective December 31, 2003, the Currency Committee consisted of two separate subgroups, one for the Group's vehicle businesses and one for MTU
Aero Engines Group. Each subgroup consisted of members of senior management from each of the respective businesses as well as from Corporate Treasury and Risk Controlling. Since January 1,
2004, the Currency Committee consists exclusively of those members who previously formed the subgroup responsible for the vehicle business. Corporate Treasury implements decisions concerning foreign
currency hedging taken by the Currency Committee. Risk Controlling regularly informs the Board of Management of the actions of Corporate Treasury based on the decisions of the Currency Committee.

Interest Rate and Equity Price Risk Management.DaimlerChrysler holds a variety of interest rate sensitive assets and
liabilities to manage the liquidity and cash needs of its day-to-day operations. In addition a substantial volume of interest rate sensitive assets and liabilities is related
to the leasing and sales financing

F-74

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business
which is operated by DaimlerChrysler Services. In particular, the Group's leasing and sales financing business enters into transactions with customers, primarily resulting in fixed rate
receivables. DaimlerChrysler's general policy is to match funding in terms of maturities and interest rates. However, for a limited portion of the receivables portfolio funding does not match in terms
of maturities and interest rates. As a result, DaimlerChrysler is exposed to risks due to changes in interest rates. DaimlerChrysler coordinates funding activities of the industrial business and
financial services on the Group level. The Group uses interest rate derivative instruments such as interest rate swaps, forward rate agreements, swaptions, caps and floors to achieve the desired
interest rate maturities and asset/liability structures.

The
Group assesses interest rate risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating
hedging opportunities. The Group maintains risk management control systems independent of Corporate Treasury to monitor interest rate risk attributable to DaimlerChrysler's outstanding interest rate
exposures as well as its offsetting hedge positions. The risk management control systems involve the use of analytical techniques, including value-at-risk analyses, to estimate
the expected impact of changes in interest rates on the Group's future cash flows.

DaimlerChrysler
also holds, to a minor extent, investments in equity securities. The corresponding market risk and the risk of derivative financial hedging instruments for equities is
and was not material to the Group in the displayed reporting periods.

Information with Respect to Fair Value Hedges.Gains and losses in fair value of recognized assets and liabilities and firm
commitments of operating transactions as well as gains and losses on derivative financial instruments designated as fair value hedges of these recognized assets and liabilities and firm commitments
are recognized currently in revenues or cost of sales, as the transactions being hedged involve sales or production of the Group's products. Net gains and losses in fair value of both recognized
financial assets and liabilities and derivative financial instruments designated as fair value hedges of these financial assets and liabilities are recognized currently in financial income, net.

For
the year ended December 31, 2003, net losses of [EURO]57 million (2002: net gains of [EURO]34 million) were recognized in operating and financial income, net,
representing principally the component of the derivative instruments' gain or loss excluded from the assessment of hedge effectiveness and the amount of hedging ineffectiveness.

Information with Respect to Cash Flow Hedges.Changes in the value of forward foreign currency exchange contracts and
currency options designated and qualifying as cash flow hedges are reported in accumulated other comprehensive income. These amounts are subsequently reclassified into operating income, in the same
period as the underlying transactions affect operating income. Changes in the fair value of derivative hedging instruments designated as hedges of variability of cash flows associated with
variable-rate long-term debt are also reported in accumulated other comprehensive income. These amounts are subsequently reclassified into financial income, net, as a yield
adjustment in the same period in which the related interest on the floating-rate debt obligations affect earnings.

For
the year ended December 31, 2003, [EURO]11 million losses (2002: no gains or losses), representing principally the component of the derivative instruments' gain/loss
excluded from the assessment of the hedge effectiveness and the amount of hedge ineffectiveness, were recognized in operating and financial income, net.

For
the year ended December 31, 2003 and 2002, no gains or losses had to be reclassified from accumulated other comprehensive income into earnings as a result of the
discontinuance of cash flow hedges.

It
is anticipated that [EURO]889 million of net gains included in accumulated other comprehensive income at December 31, 2003, will be reclassified into earnings during the
next year.

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As of December 31, 2003, DaimlerChrysler held derivative financial instruments with a maximum maturity of 35 months to hedge its exposure to the
variability in future cash flows from foreign currency forecasted transactions.

Information with Respect to Hedges of the Net Investment in a Foreign Operation.In specific circumstances, DaimlerChrysler
seeks to hedge the currency risk inherent in certain of its long-term investments, where the functional currency is other than the euro, through the use of derivative and
non-derivative financial instruments. For the year ended December 31, 2003, net gains of [EURO]48 million (2002: [EURO]127 million) from hedging the Group's net
investments in certain foreign operations were included in the cumulative translation adjustment without affecting DaimlerChrysler's net income (loss).

33. Retained Interests in Sold Receivables and Sales of Finance Receivables

The fair value of retained interests in sold receivables was as follows:

At December 31,(in millions of [EURO])

2003

2002Fair value of estimated residual cash flows, net of prepayments, from sold receivables, before expected future net credit losses

2,960

4,119Expected future net credit losses on sold receivables

(508
)
(644
)Fair value of net residual cash flows from sold receivables

2,452

3,475Retained subordinated securities

703

764Other retained interests

2

2Retained interests in sold receivables, at fair value

3,157

4,241


During
the year, ended December 31, 2003, the Group recorded an impairment charge of [EURO]31 million (2002: [EURO]98 million) to the retained interest in sold
receivables resulting from a decline in the expected pool by pool cash flows. This decrease in cash flows was primarily the result of an increase in the estimate of future credit losses.

At
December 31, 2003, the significant assumptions used in estimating the residual cash flows from sold receivables and the sensitivity of the current fair value to immediate 10%
and 20% adverse changes are as follows:

Impact on fair value based on adverse(in millions of [EURO])

Assumption
percentage

10%
change

20%
changePrepayment speed, monthly

1.5
%
(15
)
(31
)Expected remaining net credit losses as a percentage of receivables sold

1.2
%
(50
)
(100
)Residual cash flow discount rate, annualized

12.0
%
(18
)
(37
)


The
effect of a 10% and 20% adverse change in the discount rate used to compute the fair value of the retained subordinated securities would be a decrease of [EURO]9 million and
[EURO]17 million, respectively. Similar changes to the monthly prepayment speed and the expected remaining net credit losses as a percentage of receivables sold for the retained subordinated
securities would have no adverse effect on the fair value of the retained subordinated securities.

F-76

---

These
sensitivities are hypothetical and should be used with caution. The effect of a variation in a particular assumption on the fair value of the retained interests is calculated
without changing any other assumption; in reality, changes in one assumption may result in changes in another, which might magnify or counteract the sensitivities.

Actual
and projected credit losses for receivables securitized were as follows:

Receivables securitized inActual and projected credit losses
Percentages as of2000

2001

2002

2003December 31, 2003

2.2
%
2.5
%
2.4
%
2.5
%December 31, 2002

2.3
%
2.4
%
2.6
%December 31, 2001

1.7
%
2.4
%December 31, 2000

1.2
%


Static
pool losses are calculated by summing the actual and projected future credit losses and dividing them by the original balance of each pool of assets. The amount shown above for
each year is a weighted average for all securitizations during that year and outstanding at December 31, 2003.

Certain
cash flows received and paid to securitization trusts were as follows:

(in millions of [EURO])

2003

2002Proceeds from new securitizations

10,018

10,705Proceeds from collections reinvested in previous wholesale securitizations

46,623

49,888Amounts reinvested in previous wholesale securitizations

(46,678
)
(49,965
)Servicing fees received

219

304Receipt of cash flow on retained interest in securitized receivables

718

553


The
outstanding balance, delinquencies and net credit losses of sold receivables and other receivables, of those companies that sell receivables, as of and for the years ended
December 31, 2003 and 2002, respectively, were as follows:

|                              |  | Outstanding
balance at |   | Delinquencies >60 days at |   | Net credit losses for the year ended |  
|----------------------------- |  | ---------------------- | - | ------------------------- | - | ------------------------------------ | -
|
|Retail receivables            |  | 44,190                 |   | 48,476                    |   | 201                                  |  
|Wholesale receivables         |  | 15,246                 |   | 16,754                    |   | 1                                    |  
|                              |  |                        |   |                           |   |                                      |  
|Total receivables managed     |  | 59,436                 |   | 65,230                    |   | 202                                  |  
|Less: receivables sold        |  | (22,154                | ) | (30,103                   | ) | (35                                  | )
|                              |  |                        |   |                           |   |                                      |  
|Receivables held in portfolio |  | 37,282                 |   | 35,127                    |   | 167                                  |  

DaimlerChrysler
mainly sells automotive finance receivables in the ordinary course of the business to trusts that are considered Qualifying Special Purpose Entities under SFAS 140
("QSPEs") as well as selling to trusts that are multi-seller and multi-collateralized bank conduits that may be considered to be Variable Interest Entities ("VIEs"). The Group also retains a residual
beneficial interest in the receivables sold which is designed to absorb substantially all of the credit, prepayment, and interest-rate risk of the receivables transferred to the trusts.
This retained interest balance represents the Group's maximum exposure to loss. The following summarizes the

F-77

---

outstanding
balance of the receivables sold to the QSPEs and VIEs and corresponding retained interests balances as of December 31, 2003:

(in millions of [EURO])

Receivables
sold

Retained
interest in
sold
receivablesVariable interest entities

4,384

783Qualifying special purpose entities

17,770

2,37422,154

3,157


During
the year ended December 31, 2003, DaimlerChrysler sold [EURO]9,557 million (2002: [EURO]8,653 million) and [EURO]46,678 million (2002:
[EURO]49,965 million) of retail and wholesale receivables, respectively. From these transactions, the Group recognized gains of [EURO]249 million (2002: [EURO]162 million) and
[EURO]196 million (2002: [EURO]201 million) on sales of retail and wholesale receivables, respectively.

Significant
assumptions used in measuring the residual interest resulting from the sale of retail and wholesale receivables were as follows (weighted average rates for securitizations
completed during the year) at December 31, 2003 and 2002:

|                                                                                 |  | Retail |   | Wholesale |  
|-------------------------------------------------------------------------------- |  | ------ | - | --------- | -
|
|Prepayment speed assumption (monthly rate)                                       |  | 1.5    | % | 1.0-1.5   | %
|Estimated lifetime net credit losses (an average percentage of sold receivables) |  | 2.5    | % | 2.6       | %
|Residual cash flows discount rate (annual rate)                                  |  | 12.0   | % | 12.0      | %

---

During the year ended December 31, 2003, the Group recognized net servicing liabilities of [EURO]10 million and related net
amortization of [EURO]2 million. There was no servicing asset valuation allowance as of December 31, 2003. The fair value of net servicing liability at December 31, 2003 was
[EURO]18 million and was determined by discounting estimated cash flows at current market rates.

To
support the Group's asset-backed commercial paper program in North America, a group of financial institutions have provided contractually committed liquidity facilities aggregating
$4.5 billion which expire in November 2004, and are subject to annual renewal. These liquidity facilities can only be drawn upon by the special purpose entity to which the Group's North
American financial services companies will sell receivables under this program. As of December 31, 2003, none of the liquidity facilities have been utilized.

34. Segment Reporting

Information with respect to the Group's reportable segments follows:

Mercedes Car Group.This segment includes activities related mainly to the development, design, manufacture, assembly and
sale of passenger cars and off-road vehicles under the brand names Mercedes-Benz, smart and Maybach as well as related parts and accessories.

Chrysler Group.This segment includes the development, design, manufacture, assembly and sale of cars and trucks under the
brand names Chrysler, Jeep® and Dodge and related automotive parts and accessories.

F-78

---

Commercial Vehicles.This segment is involved in the development, design, manufacture, assembly and sale of vans, trucks,
buses and Unimogs as well as related parts and accessories. The products are sold mainly under the brand names Mercedes-Benz, Setra and Freightliner.

Services.The activities in this segment extend to the marketing of services related to financial services (principally
retail and lease financing for vehicles and dealer financing), insurance brokerage, trading and information technology. This Segment also owns, or holds investments in several companies which provide
services in the areas of mobility management, including traffic management, telematics products and toll collection.

In
October 2000, the information technology activities were contributed into a joint venture. The Group's 49.9% interest in T-Systems ITS is included at equity
subsequent to that date. In January 2002, DaimlerChrysler exercised its option to sell to Deutsche Telekom the Group's 49.9% interest in T-Systems ITS. The sale was consummated in
March 2002 with the termination of the joint venture.

Other Activities.This segment comprises businesses, operations and investments not allocated to one of DaimlerChrysler's
other business segments. The segment includes the Group's equity method investments EADS and Mitsubishi Motors Corporation ("MMC"), the real estate and corporate research activities, the holding
companies and financing subsidiaries through which the Group refinances the capital needs of the operating businesses in the capital markets. In April 2001, DaimlerChrysler completed the sale
of 60% of the interests in its Automotive Electronics activities to Continental AG. The Group's 40% interest in the Automotive Electronics activities ("Conti Temic microelectronic") is included at
equity from that date. In April 2002, DaimlerChrysler exercised its option to sell to Continental AG the Group's remaining 40% Interest in Conti Temic microelectronic. It also includes the MTU
Aero Engines business unit through December 31, 2003.

Management Reporting and Controlling Systems.The Group's management reporting and controlling systems use accounting
policies that are substantially the same as those described in Note 1 in the summary of significant accounting policies (U.S. GAAP).

The
Group measures the performance of its operating segments through "Operating Profit." DaimlerChrysler's consolidated Operating Profit (Loss) is the sum of the operating profits and
losses of its reportable segments adjusted for consolidation and elimination entries. Segment Operating Profit (Loss) is computed starting with income (loss) before income taxes, minority interests,
discontinued operations, and the cumulative effect of changes in accounting principles, and then adjusting that amount to 1) exclude pension and postretirement benefit income or expenses, other
than current and prior year service costs and settlement/curtailment losses, 2) exclude impairment of investment in EADS in 2003, 3) exclude interest and similar income and interest and
similar expenses, 4) exclude other financial income (loss), net and 5) include or exclude certain miscellaneous items. In addition, this result is further adjusted to a) include
pre-tax income (loss) from discontinued operations, adjusted to exclude or include the reconciling items 1 to 5 described above, b) include pre-tax gain (loss) on the
disposal of discontinued operations, and c) include the Group's share of all of the above reconciling items included in the net earnings (losses) of investments accounted for at equity.

Intersegment
sales and revenues are generally recorded at values that approximate third-party selling prices.

Revenues
are allocated to countries based on the location of the customer; long-lived assets are disclosed according to the physical location of these assets.

Capital
expenditures represent the purchase of property, plant and equipment.

F-79

---

Segment
information as of and for the years ended December 31, 2003, 2002 and 2001 follows:

|(in millions of [EURO])       |  | Mercedes
Car Group |  | Chrysler
Group |   | Commercial
Vehicles |   | Services |  | Other
Activities |  | Total
Segments |   | Eliminations |   | Consolidated |  
|----------------------------- |  | ------------------ |  | -------------- | - | ------------------- | - | -------- |  | ---------------- |  | -------------- | - | ------------ | - | ------------ | -
|2003                          |  |                    |  |                |   |                     |   |          |  |                  |  |                |   |              |   |              |  
|Revenues                      |  | 48,025             |  | 49,321         |   | 26,909              |   | 11,997   |  | 185              |  | 136,437        |   |             |   | 136,437      |  
|Intersegment sales            |  | 3,421              |  |               |   | 1,608               |   | 2,040    |  | 255              |  | 7,324          |   | (7,324       | ) |             |  
|Total revenues                |  | 51,446             |  | 49,321         |   | 28,517              |   | 14,037   |  | 440              |  | 143,761        |   | (7,324       | ) | 136,437      |  
|Operating Profit (Loss)       |  | 3,126              |  | (506           | ) | 855                 |   | 1,240    |  | 1,285            |  | 6,000          |   | (314         | ) | 5,686        |  
|Identifiable segment assets   |  | 24,161             |  | 47,147         |   | 16,015              |   | 83,239   |  | 29,781           |  | 200,343        |   | (22,075      | ) | 178,268      |  
|Capital expenditures          |  | 2,939              |  | 2,487          |   | 1,006               |   | 76       |  | 121              |  | 6,629          |   | (15          | ) | 6,614        |  
|Depreciation and amortization |  | 1,789              |  | 3,927          |   | 935                 |   | 5,087    |  | 151              |  | 11,889         |   | (290         | ) | 11,599       |  
|2002                          |  |                    |  |                |   |                     |   |          |  |                  |  |                |   |              |   |              |  
|Revenues                      |  | 46,796             |  | 59,716         |   | 26,905              |   | 13,765   |  | 186              |  | 147,368        |   |             |   | 147,368      |  
|Intersegment sales            |  | 3,374              |  | 465            |   | 1,496               |   | 1,934    |  | 322              |  | 7,591          |   | (7,591       | ) |             |  
|Total revenues                |  | 50,170             |  | 60,181         |   | 28,401              |   | 15,699   |  | 508              |  | 154,959        |   | (7,591       | ) | 147,368      |  
|Operating Profit (Loss)       |  | 3,020              |  | 609            |   | (343                | ) | 3,060    |  | 903              |  | 7,249          |   | (395         | ) | 6,854        |  
|Identifiable segment assets   |  | 22,103             |  | 52,807         |   | 15,269              |   | 87,833   |  | 33,970           |  | 211,982        |   | (24,655      | ) | 187,327      |  
|Capital expenditures          |  | 2,495              |  | 3,155          |   | 1,263               |   | 95       |  | 137              |  | 7,145          |   |             |   | 7,145        |  
|Depreciation and amortization |  | 1,652              |  | 4,276          |   | 1,210               |   | 6,804    |  | 157              |  | 14,099         |   | (255         | ) | 13,844       |  
|2001                          |  |                    |  |                |   |                     |   |          |  |                  |  |                |   |              |   |              |  
|Revenues                      |  | 44,002             |  | 62,676         |   | 27,084              |   | 14,975   |  | 1,649            |  | 150,386        |   |             |   | 150,386      |  
|Intersegment sales            |  | 3,703              |  | 807            |   | 1,488               |   | 1,876    |  | 371              |  | 8,245          |   | (8,245       | ) |             |  
|Total revenues                |  | 47,705             |  | 63,483         |   | 28,572              |   | 16,851   |  | 2,020            |  | 158,631        |   | (8,245       | ) | 150,386      |  
|Operating Profit (Loss)       |  | 2,951              |  | (5,281         | ) | (514                | ) | 612      |  | 1,181            |  | (1,051         | ) | (267         | ) | (1,318       | )
|Identifiable segment assets   |  | 20,558             |  | 63,325         |   | 16,232              |   | 100,570  |  | 31,200           |  | 231,885        |   | (24,475      | ) | 207,410      |  
|Capital expenditures          |  | 2,061              |  | 5,083          |   | 1,484               |   | 112      |  | 168              |  | 8,908          |   | (12          | ) | 8,896        |  
|Depreciation and amortization |  | 1,853              |  | 5,364          |   | 922                 |   | 7,071    |  | 197              |  | 15,407         |   | (217         | ) | 15,190       |  

In 2003, the Chrysler Group and Services segments agreed to a new arrangement regarding the sharing of risks associated with the residual values
of certain leased vehicles. In addition, the Chrysler Group and
Services segments negotiated reduced pricing on certain retail financing programs offered by the Chrysler Group as sales incentives in 2003. The adjusted pricing reflects the current favorable funding
environment as well as Services becoming the exclusive provider of selected discount consumer financing for the Chrysler Group. Both arrangements resulted in a favorable impact of
[EURO]244 million on the 2003 operating results at the Chrysler Group. These arrangements decreased Services 2003 Operating Profit by [EURO]244 million. Both arrangements had no effect
on the Group's consolidated operating results.

Capital
expenditures for equipment on operating leases for 2003, 2002 and 2001 for the Services segment amounted to [EURO]11,649 million, [EURO]12,862 million and
[EURO]14,334 million, respectively.

For
the year ended December 31, 2001, Operating Loss of the Chrysler Group segment includes [EURO]1,715 million of non-cash turnaround plan charges, other than
depreciation and amortization.

The
Operating Loss of the Commercial Vehicles segment for the year ended December 31, 2002, includes [EURO]161 million (2001: [EURO]353 million) of
non-cash turnaround plan and other charges, other than depreciation and amortization.

F-80

---

For
the years ended December 31, 2002 and 2001, Operating Profit of the Services segment includes [EURO]10 million and [EURO]41 million, respectively, from the
equity investment in T-Systems ITS, representing the Group's percentage share of the Operating Profit of T-Systems ITS. At December 31, 2001, the identifiable assets of
the Services segment includes [EURO]2,193 million of the investment in T-Systems ITS. For the year ended December 31, 2002, Operating Profit of the Services segment includes
impairment charges of [EURO]537 million, which primarily relate to equipment on operating leases and receivables from financial services.

For
the year ended December 31, 2003, Operating Profit of the Other Activities segment includes [EURO]278 million (2002: [EURO]778 million) from EADS and MMC, the
significant companies accounted for using the equity method. For the year ended December 31, 2001, Operating Profit of the Other Activities segment includes [EURO]694 million from EADS
and MMC, including a [EURO]876 million gain from the formation of Airbus SAS. Operating Profit of 2003 includes a gain of [EURO]1,031 million from the sale of MTU Aero Engines. The
net-proceeds from this sale transaction amounted to [EURO]1,052 million, of which [EURO]175 million have been loaned to the purchaser. Because MTU Aero Engines is recognized
as discontinued operations, MTU Aero Engines' revenues are not included in the Other Activities segment revenues for all periods presented. Following the sale transaction, effective
December 31, 2003, MTU Aero Engines' assets and liabilities were de-consolidated. Operating Profit, capital expenditures, and depreciation and amortization include MTU Aero Engines
until December 31, 2003 (see also Notes 4 and 10).

At
December 31, 2003, 2002 and 2001, the identifiable assets of the Other Activities segment include [EURO]4,542 million, [EURO]5,712 million and
[EURO]5,393 million, respectively, of investments in these equity method investees.

The
reconciliation of total segment operating profit (loss) to consolidated income (loss) before income taxes, minority interests, discontinued operations and cumulative effects of
changes in accounting principles is as follows:

|(in millions of [EURO])                                                                                                                                |                                                                                                                                    | 2003  |        | 2002  |        | 2001   |       
|------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------- | ----- | ------ | ----- | ------ | ------ | ------
|Total segment operating profit (loss)                                                                                                                  |                                                                                                                                    | 6,000 |        | 7,249 |        | (1,051 | )     
|Elimination and consolidation amounts                                                                                                                  |                                                                                                                                    | (314  | )      | (395  | )      | (267   | )     
|Total Group operating profit (loss)                                                                                                                    |                                                                                                                                    | 5,686 |        | 6,854 |        | (1,318 | )     
|                                                                                                                                                       | Pension and postretirement benefit income (expenses), other than current and prior service costs and settlement/curtailment losses |       | (870   | )     | 257    |        | 465   
|                                                                                                                                                       | Impairment of investment in EADS                                                                                                   |       | (1,960 | )     |       |        |      
|                                                                                                                                                       | Interest and similar income                                                                                                        |       | 521    |       | 720    |        | 1,040 
|                                                                                                                                                       | Interest and similar expenses                                                                                                      |       | (911   | )     | (1,040 | )      | (1,317
|                                                                                                                                                       | Other financial income (loss), net                                                                                                 |       | 35     |       | (112   | )      | 98    
|                                                                                                                                                       | Miscellaneous items, net                                                                                                           |       | (308   | )     | (102   | )      | 39    
|                                                                                                                                                       | Pre-tax (income) loss from discontinued operations, adjusted to exclude or include the above reconciling items                     |       | (84    | )     | (153   | )      | (186  
|                                                                                                                                                       | Pre-tax (income) loss on disposal of discontinued operations                                                                       |       | (1,031 | )     |       |        |      
|                                                                                                                                                       | The Group's share of the above reconciling items included in the net earnings (losses) of investments accounted for at equity      |       | (482   | )     | (499   | )      | (475  
|                                                                                                                                                       |                                                                                                                                    |       |        |       |        |        |       
|Consolidated income (loss) before income taxes, minority interests, cumulative effects of changes in accounting principles and discontinued operations |                                                                                                                                    | 596   |        | 5,925 |        | (1,654 | )     
|                                                                                                                                                       |                                                                                                                                    |       |        |       |        |        |       

F-81

---

Revenues
from external customers presented by geographic region are as follows:

|(in millions of [EURO]) |  | Germany |  | European
Union1 |  | United States |  | Other
American
countries |  | Asia  |  | Other
countries |  | Consolidated
|----------------------- |  | ------- |  | --------------- |  | ------------- |  | ------------------------ |  | ----- |  | --------------- |  | ------------
|2003                    |  | 23,736  |  | 24,076          |  | 63,798        |  | 10,281                   |  | 6,636 |  | 7,910           |  | 136,437     
|2002                    |  | 22,695  |  | 23,199          |  | 76,445        |  | 11,951                   |  | 6,137 |  | 6,941           |  | 147,368     
|2001                    |  | 23,980  |  | 21,088          |  | 79,607        |  | 13,336                   |  | 6,110 |  | 6,265           |  | 150,386     

---

Germany accounts for [EURO]21,164 million of long-lived assets (2002: [EURO]19,627 million; 2001:
[EURO]20,584 million), the United States for [EURO]36,430 million (2002: [EURO]44,758 million; 2001: [EURO]58,850 million) and other countries for
[EURO]13,091 million (2002: [EURO]14,344 million; 2001: [EURO]12,971 million).

35. Earnings (Loss) per Share

The computation of basic and diluted earnings (loss) per share for "Income (loss) from continuing operations" is as follows:

|                                                        |                                                              | Year ended December 31, |      
|------------------------------------------------------- | ------------------------------------------------------------ | ----------------------- | -----
|
|Income (loss) from continuing operations  basic        |                                                              | (418                    | )    
|                                                        |                                                              |                         |      
|                                                        | Interest expense on convertible bonds and notes (net of tax) |                         |     
|                                                        |                                                              |                         |      
|Income (loss) from continuing operations  diluted      |                                                              | (418                    | )    
|                                                        |                                                              |                         |      
|Weighted average number of shares outstanding  basic   |                                                              | 1,012.7                 |      
|                                                        |                                                              |                         |      
|                                                        | Dilutive effect of convertible bonds and notes               |                         |     
|                                                        |                                                              |                         |      
|Weighted average number of shares outstanding  diluted |                                                              | 1,012.7                 |      
|                                                        |                                                              |                         |      
|Earnings (loss) per share from continuing operations    |                                                              |                         |      
|                                                        | Basic                                                        |                         | (0.41
|                                                        |                                                              |                         |      
|                                                        | Diluted                                                      |                         | (0.41
|                                                        |                                                              |                         |      

See
Note 23 for shares issued upon conversion of bonds and notes in 2003.

Because
the Group reported a loss from continuing operations for the year ended December 31, 2003 and 2001, the diluted loss per share does not include the antidilutive effects of
convertible bonds and notes. Had the Group reported income from continuing operations for the year ended December 31, 2003 and 2001, the weighted average number of shares outstanding would have
potentially been diluted by 0.5 million and 10.7 million shares resulting from the conversion of bonds and notes, respectively.

Stock
options issued in 2003, 2002 and 2001 in connection with the Stock Option Plan 2000 were not included in the computation of diluted earnings per share for all years presented,
because the options' underlying exercise prices were greater than the average market prices for DaimlerChrysler Ordinary Shares for all periods ended at December 31, 2003, 2002 and 2001.

F-82

---

36. Related Party Transactions

The Group purchases materials, supplies and services from numerous suppliers throughout the world in the ordinary course of our business. These suppliers include
firms in which the Group holds an ownership interest and firms that are affiliated with some members of DaimlerChrysler's Supervisory Board.

Mitsubishi
Motor Manufacturing of America, a subsidiary of Mitsubishi Motors Corporation, produces the Dodge Stratus and Chrysler Sebring coupes for the Group. As discussed in
Note 3, DaimlerChrysler owns a 37% equity interest in Mitsubishi Motors Corporation.

DaimlerChrysler
has an agreement with McLaren Cars Ltd., a wholly owned subsidiary of TAG McLaren Holdings Ltd., for the design and production of a new
high-performance sports car, the SLR, which DaimlerChrysler expects to launch in the first six months of 2004. The Group owns a 40% equity interest in TAG McLaren Holdings Ltd.

DaimlerChrysler
increased its stake in the Formula 1 engine manufacturer Ilmor Engineering Ltd. from 25% to 55% in the year 2002 and has agreed to gradually acquire the remaining
shares by 2005. In September 2003, DaimlerChrysler increased its equity stake to 70%. The company has been renamed Mercedes-Ilmor. Mercedes-Ilmor and DaimlerChrysler have been responsible for
the development, design and production of Mercedes-Benz Formula 1 engines since 1993, which DaimlerChrysler supplies to the West McLaren team in support of motor sport activities under the
Mercedes-Benz brand. DaimlerChrysler has consolidated Mercedes-Ilmor since January 1, 2003.

In
May 2002, DaimlerChrysler Corporation sold its Dayton Thermal Products Plant to Behr Dayton Thermal Products LLC, a joint venture company in which Behr America, Inc.
owns a majority interest and DaimlerChrysler Corporation owns a minority interest. DaimlerChrysler Corporation is required to maintain its minority interest in the joint venture company through
May 2004 and to purchase products from it at competitively-based prices under a supply agreement entered into in connection with the sale. Provision for the loss on the sale was included in the
Chrysler Group Turnaround Plan (see Note 7).

The
supply agreement is valid from April 2002 through April 2008. Product pricing was based on the existing cost structure of the Dayton Thermal Products Plant and was
comparable to pricing in effect prior to the transaction. The supply agreement included the potential for price reductions in future years based on productivity and other gains by Behr Dayton. There
is no minimum purchase volume commitment included in the agreement. DaimlerChrysler Corporation agreed that Behr Dayton would be the exclusive provider of certain climate control components for
existing and specific future vehicles through the end of the contract term. There was no value assigned to the supply agreement.

The
Group's subsidiaries DaimlerChrysler Coordination Center S.A. (DCCC) and DaimlerChrysler Aerospace AG (DASA) granted a series of loans to debis Air Finance B.V. (dAF). Through
DaimlerChrysler's subsidiaries DaimlerChrysler Services AG and DaimlerChrysler Aerospace AG, the Group holds a 45% non-controlling interest in debis Air Finance B.V. The total book value
of these loans as of December 31, 2003, was [EURO]524 million, the highest aggregate amount outstanding during 2003 was [EURO]680 million. The interest rates are partially fixed,
partially based on Libor.

The
Group purchases products and services from T-Systems ITS, an information technology company. As discussed in Note 4, the Group beneficially owned a 49.9% equity
interest in T-Systems ITS through a joint venture until March 2002. The Group continues to purchase products from T-Systems ITS.

As
discussed in Note 4, in April, 2002, DaimlerChrysler exercised its option to sell its 40% interest in Conti Temic microelectronic GmbH to Continental. The Group continues to
purchase products from Conti Temic microelectronic GmbH.

F-83

---

As
described in more detail in Note 31, DaimlerChrysler provides a number of guarantees with respect to Toll Collect GmbH, a joint venture in which DaimlerChrysler holds an equity
interest of 45%.

In
November 2003, DaimlerChrysler sold 60% of its equity interest in Mercedes-Benz Lenkungen GmbH to ThyssenKrupp Automotive AG. DaimlerChrysler accounts for its
remaining 40% equity interest in the company using the equity method of accounting. Mr. Bernhard Walter, a member of DaimlerChrysler's
Supervisory Board, abstained from the Supervisory Board voting for the approval of the sale since he is also a member of the Supervisory Board of ThyssenKrupp AG, the parent company of ThyssenKrupp
Automotive AG.

In
2003, Dr. Mark Wössner, a member of DaimlerChrysler's Supervisory Board, received payments for the rental of premises to Westfalia Van Conversion GmbH, a wholly
owned subsidiary of DaimlerChrysler AG, in the amount of [EURO]1 million.

The
following represent transactions with shareholders:

DaimlerChrysler
incurred expenses of approximately $957,000 in 2003 for advertising and related marketing activities with a U.S. magazine. Earl G. Graves, member of DaimlerChrysler's
Supervisory Board and shareholder of DaimlerChrysler AG, is the Chairman, Chief Executive Officer and sole stockholder of the magazine's ultimate parent company.

DB
Value GmbH, a wholly owned subsidiary of Deutsche Bank AG, owns approximately 11.8% of DaimlerChrysler's outstanding shares. Deutsche Bank AG and its subsidiaries provided the Group
with various financial and other services for which they were paid reasonable and customary fees. Additionally, DaimlerChrysler provides a [EURO]672 million guarantee to Deutsche Bank AG for
the company's operation of DaimlerChrysler's corporate credit card program for corporate travel expenses. The guarantee covers the obligations of the company's employees towards Deutsche Bank AG
arising from that program in case of employee's default. DaimlerChrysler so far has not incurred any major payments to Deutsche Bank AG from that guarantee.

37. Compensation and share ownership of the members of the Board of Management and the Supervisory Board and further additional information concerning German Corporate
Governance Code

Remuneration.The total remuneration paid by Group related companies to the members of the Board of Management of DaimlerChrysler AG are
calculated from the amount of compensation paid in cash and from the non-cash benefits in kind. The total remuneration in 2003 for the members of the Board of Management of DaimlerChrysler
AG amounted to [EURO]40.8 million, of which [EURO]13.4 million is fixed and [EURO]27.4 million is short-term and mid-term incentive remuneration
components. In 2003, no compensation resulted from long-term incentive remuneration components.

In
2003, 3.14 million stock options from the Stock Option Plan 2000 were granted to the members of the Board of Management as a long-term remuneration component. Also
in 2003, 503,000 performance-
based awards were granted to the members of the Board of Management based on a 3 year performance plan. For detailed information on stock based compensation programs, see Note 24.

The
remuneration paid in 2003 to the members of the Supervisory Board of DaimlerChrysler AG for services in all capacities to the Group amounted to [EURO]2.8 million.

Directors' Dealings.Pursuant to § 15a of the German Securities Trading Act, members of the Board of Management and the
Supervisory Board as well as their spouses and first-grade relatives are legally required to disclose significant purchases or sales of Ordinary Shares, options or derivatives of DaimlerChrysler AG
and

F-84

---

Group
related companies (in 2003: EADS and Maschinenfabrik Esslingen AG). In the fiscal year just ended, no such transactions were reported, which are to be published.

Share Ownership.As of December 31, 2003, the current members of the Board of Management as a group owned 10.1 million
Ordinary Shares, options or derivatives (SAR) of DaimlerChrysler AG (0.998% of all outstanding shares) and the current members of the Supervisory Board as a group owned 0.1 million Ordinary
Shares, options or derivatives (SAR) of DaimlerChrysler AG (0.011% of all outstanding shares).

Transactions with Related Parties.For transactions with related parties, which are shareholders of DaimlerChrysler AG, please see last
paragraph of Note 36.

38. Subsequent Events

On January 15, 2004, DaimlerChrysler entered into a purchase agreement with MMC to acquire an additional 22% equity interest in MFTBC for approximately
[EURO]0.4 billion in cash (see Note 4).

On
January 27, 2004, the Toll Collect consortium, in which DaimlerChrysler holds a 45% equity interest, presented to the Federal Minister of Transport, Building and Housing a
revised proposal for the completion and operation of an electronic toll collection system for commercial vehicles over 12 t GVW in Germany. In intensive negotiations with representatives from the
Federal Ministry of Transport, Building and Housing, the parties could not reach a final agreement with respect to the offer submitted. Negotiations between the parties were primarily focused on
contract terms pertaining to contractual commitments and possible future contract termination options as well as matters regarding the technical risks associated with the toll collection system. On
February 17, 2004, the Federal Minister of Transport, Building and Housing announced that the consortium should formally receive notification of termination of the operating agreement. To avoid
contract termination,
the consortium has the possibility to reach agreement with the Federal Ministry of Transport, Building and Housing within a time period of two months following the receipt of the notification of
termination of the operating agreement. A contract termination could have a substantial negative impact on the Group's operating results and financial condition.

39. Condensed Consolidating Financial Information

DaimlerChrysler AG, the parent company of the Group, fully and unconditionally guarantees certain publicly issued debt of its 100% owned subsidiary
DaimlerChrysler North America Holding Corporation. The following condensed consolidating financial information for DaimlerChrysler AG, DaimlerChrysler North America Holding Corporation and all other
subsidiaries on a combined basis set forth below is intended to provide investors with meaningful and comparable financial information about DaimlerChrysler AG and its subsidiary issuer. Investments
and long-term financial assets include the investments in consolidated subsidiaries recorded under the equity method for purposes of the condensed consolidating financial information.
Financial income, net includes the income or loss related to such investments.

F-85

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|2003
(in millions of [EURO])             |                                                        | DaimlerChrysler AG (parent company)        |         | DaimlerChrysler North America Holding |        | Other subsidiaries (combined) |          | Consolidating adjustments |         | DaimlerChrysler AG (consolidated) |         
|---------------------------------------- | ------------------------------------------------------ | ------------------------------------------ | ------- | ------------------------------------- | ------ | ----------------------------- | -------- | ------------------------- | ------- | --------------------------------- | --------
|Assets                                   |                                                        |                                            |         |                                       |        |                               |          |                           |         |                                   |         
|                                         |                                                        | Intangible assets                          |         | 78                                    |        |                              |          | 4,557                     |         |                                  |         
|                                         |                                                        | Property, plant and equipment, net         |         | 6,754                                 |        |                              |          | 26,175                    |         | (12                               | )       
|                                         |                                                        | Investments and long-term financial assets |         | 28,433                                |        | 45,768                        |          | 8,884                     |         | (74,337                           | )       
|                                         |                                                        | Equipment on operating leases, net         |         | 4,270                                 |        |                              |          | 20,320                    |         | (205                              | )       
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |         |                                   |         
|                                         | Fixed assets                                           |                                            | 39,535  |                                       | 45,768 |                               | 59,936   |                           | (74,554 | )                                 | 70,685  
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |         |                                   |         
|                                         |                                                        | Inventories                                |         | 5,791                                 |        |                              |          | 9,886                     |         | (729                              | )       
|                                         |                                                        | Trade, finance and other receivables       |         | 13,909                                |        | 3,669                         |          | 71,858                    |         | (14,869                           | )       
|                                         |                                                        | Securities                                 |         | 211                                   |        | 342                           |          | 2,715                     |         |                                  |         
|                                         |                                                        | Cash and cash equivalents                  |         | 2,934                                 |        | 4,918                         |          | 3,165                     |         |                                  |         
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |         |                                   |         
|                                         | Non-fixed assets                                       |                                            | 22,845  |                                       | 8,929  |                               | 87,624   |                           | (15,598 | )                                 | 103,800 
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |         |                                   |         
|                                         | Deferred taxes and prepaid expenses                    |                                            | 3,734   |                                       | 103    |                               | 8,339    |                           | (8,393  | )                                 | 3,783   
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |         |                                   |         
|                                         | Total assets                                           |                                            | 66,114  |                                       | 54,800 |                               | 155,899  |                           | (98,545 | )                                 | 178,268 
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |         |                                   |         
|Liabilities and stockholders' equity     |                                                        |                                            |         |                                       |        |                               |          |                           |         |                                   |         
|                                         | Stockholders' equity                                   |                                            | 34,481  |                                       | 10,489 |                               | 60,765   |                           | (71,254 | )                                 | 34,481  
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |         |                                   |         
|                                         | Minority interests                                     |                                            |        |                                       |       |                               | 470      |                           |        |                                   | 470     
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |         |                                   |         
|                                         | Accrued liabilities                                    |                                            | 10,112  |                                       | 34     |                               | 29,135   |                           | (109    | )                                 | 39,172  
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |         |                                   |         
|                                         |                                                        | Financial liabilities                      |         | 11,115                                |        | 43,292                        |          | 37,086                    |         | (15,803                           | )       
|                                         |                                                        | Trade liabilities                          |         | 3,795                                 |        |                              |          | 7,788                     |         |                                  |         
|                                         |                                                        | Other liabilities                          |         | 2,006                                 |        | 985                           |          | 8,394                     |         | (2,580                            | )       
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |         |                                   |         
|                                         | Liabilities                                            |                                            | 16,916  |                                       | 44,277 |                               | 53,268   |                           | (18,383 | )                                 | 96,078  
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |         |                                   |         
|                                         | Deferred taxes and deferred income                     |                                            | 4,605   |                                       |       |                               | 12,261   |                           | (8,799  | )                                 | 8,067   
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |         |                                   |         
|                                         | Total liabilities                                      |                                            | 31,633  |                                       | 44,311 |                               | 95,134   |                           | (27,291 | )                                 | 143,787 
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |         |                                   |         
|                                         | Total liabilities and stockholders' equity             |                                            | 66,114  |                                       | 54,800 |                               | 155,899  |                           | (98,545 | )                                 | 178,268 
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |         |                                   |         
|                                         | Revenues                                               |                                            | 56,248  |                                       |       |                               | 117,777  |                           | (37,588 | )                                 | 136,437 
|                                         | Cost of sales                                          |                                            | (44,808 | )                                     |       |                               | (101,847 | )                         | 36,729  |                                   | (109,926
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |         |                                   |         
|Gross margin                             |                                                        | 11,440                                     |         |                                      |        | 15,930                        |          | (859                      | )       | 26,511                            |         
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |         |                                   |         
|                                         | Selling, administrative and other expenses             |                                            | (7,327  | )                                     | (17    | )                             | (11,645  | )                         | 1,217   |                                   | (17,772 
|                                         | Research and development                               |                                            | (3,382  | )                                     |       |                               | (2,295   | )                         | 106     |                                   | (5,571  
|                                         | Other income                                           |                                            | 532     |                                       |       |                               | 785      |                           | (604    | )                                 | 713     
|                                         | Turnaround plan expenses  Chrysler Group              |                                            |        |                                       |       |                               | (469     | )                         |        |                                   | (469    
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |         |                                   |         
|Income (loss) before financial income    |                                                        | 1,263                                      |         | (17                                   | )      | 2,306                         |          | (140                      | )       | 3,412                             |         
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |         |                                   |         
|                                         |                                                        | Impairment of investment in EADS           |         | (1,960                                | )      |                              |          | (1,960                    | )       | 1,960                             |         
|                                         |                                                        | Other financial income (expense), net      |         | 1,225                                 |        | 425                           |          | 1,267                     |         | (3,773                            | )       
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |         |                                   |         
|                                         | Financial income, net                                  |                                            | (735    | )                                     | 425    |                               | (693     | )                         | (1,813  | )                                 | (2,816  
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |         |                                   |         
|Income (loss) before income taxes        |                                                        | 528                                        |         | 408                                   |        | 1,613                         |          | (1,953                    | )       | 596                               |         
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |         |                                   |         
|                                         | Income taxes                                           |                                            | (946    | )                                     | 544    |                               | (627     | )                         | 50      |                                   | (979    
|                                         | Minority interests                                     |                                            |        |                                       |       |                               | (35      | )                         |        |                                   | (35     
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |         |                                   |         
|Income (loss) from continuing operations |                                                        | (418                                       | )       | 952                                   |        | 951                           |          | (1,903                    | )       | (418                              | )       
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |         |                                   |         
|                                         | Income from discontinued operations                    |                                            | 14      |                                       |       |                               | 14       |                           | (14     | )                                 | 14      
|                                         | Income on disposal of discontinued operations          |                                            | 882     |                                       |       |                               | 888      |                           | (888    | )                                 | 882     
|                                         | Cumulative effects of changes in accounting principles |                                            | (30     | )                                     |       |                               | (30      | )                         | 30      |                                   | (30     
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |         |                                   |         
|Net income (loss)                        |                                                        | 448                                        |         | 952                                   |        | 1,823                         |          | (2,775                    | )       | 448                               |         
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |         |                                   |         

F-86

---

|2003
(in millions of [EURO])                     |                                                                    | DaimlerChrysler AG (parent company) |        | DaimlerChrysler North America Holding |        | Other subsidiaries (combined) |         | Consolidating adjustments |        | DaimlerChrysler AG (consolidated) |        
|------------------------------------------------ | ------------------------------------------------------------------ | ----------------------------------- | ------ | ------------------------------------- | ------ | ----------------------------- | ------- | ------------------------- | ------ | --------------------------------- | -------
|Cash provided by (used for) operating activities |                                                                    | 6,318                               |        | 891                                   |        | 11,847                        |         | (2,560                    | )      | 16,496                            |        
|                                                 |                                                                    |                                     |        |                                       |        |                               |         |                           |        |                                   |        
|                                                 | Increase in equipment on operating leases                          |                                     | (2,934 | )                                     |       |                               | (12,813 | )                         | 143    |                                   | (15,604
|                                                 | Purchases of property, plant, equipment and other fixed assets     |                                     | (2,507 | )                                     |       |                               | (4,422  | )                         | 12     |                                   | (6,917 
|                                                 | Proceeds from disposals of equipment on operating leases           |                                     | 2,277  |                                       |       |                               | 9,674   |                           |       |                                   | 11,951 
|                                                 | Proceeds from disposals of fixed assets                            |                                     | 297    |                                       |       |                               | 346     |                           |       |                                   | 643    
|                                                 | Payments for investments in businesses                             |                                     | (912   | )                                     |       |                               | (414    | )                         | 305    |                                   | (1,021 
|                                                 | Proceeds from disposals of businesses                              |                                     | 298    |                                       |       |                               | 1,216   |                           | (305   | )                                 | 1,209  
|                                                 | (Increase) decrease in receivables from financial services, net    |                                     | (101   | )                                     |       |                               | (5,919  | )                         | 5      |                                   | (6,015 
|                                                 | Disposition (acquisitions) of securities (other than trading), net |                                     | 179    |                                       | (88    | )                             | (481    | )                         |       |                                   | (390   
|                                                 | Other                                                              |                                     | (1,077 | )                                     | (1,207 | )                             | 3,453   |                           | (1,303 | )                                 | (134   
|                                                 |                                                                    |                                     |        |                                       |        |                               |         |                           |        |                                   |        
|Cash used for investing activities               |                                                                    | (4,480                              | )      | (1,295                                | )      | (9,360                        | )       | (1,143                    | )      | (16,278                           | )      
|                                                 |                                                                    |                                     |        |                                       |        |                               |         |                           |        |                                   |        
|                                                 | Change in financial liabilities                                    |                                     | (696   | )                                     | 2,647  |                               | (1,725  | )                         | 3,821  |                                   | 4,047  
|                                                 | Dividends paid                                                     |                                     | (1,519 | )                                     | (442   | )                             | (1,601  | )                         | 2,025  |                                   | (1,537 
|                                                 | Other                                                              |                                     | 1      |                                       |       |                               | 2,150   |                           | (2,143 | )                                 | 8      
|                                                 |                                                                    |                                     |        |                                       |        |                               |         |                           |        |                                   |        
|Cash provided by (used for) financing activities |                                                                    | (2,214                              | )      | 2,205                                 |        | (1,176                        | )       | 3,703                     |        | 2,518                             |        
|                                                 |                                                                    |                                     |        |                                       |        |                               |         |                           |        |                                   |        
|Effect of foreign exchange rate changes on cash  |                                                                    |                                    |        | (865                                  | )      | (204                          | )       |                          |        | (1,069                            | )      
|                                                 |                                                                    |                                     |        |                                       |        |                               |         |                           |        |                                   |        
|Net increase (decrease) in cash and cash equiv.  |                                                                    | (376                                | )      | 936                                   |        | 1,107                         |         |                          |        | 1,667                             |        
|                                                 |                                                                    |                                     |        |                                       |        |                               |         |                           |        |                                   |        
|Cash and cash equivalents                        |                                                                    |                                     |        |                                       |        |                               |         |                           |        |                                   |        
|                                                 | At beginning of period                                             |                                     | 3,100  |                                       | 3,982  |                               | 2,018   |                           |       |                                   | 9,100  
|                                                 |                                                                    |                                     |        |                                       |        |                               |         |                           |        |                                   |        
|                                                 | At end of period                                                   |                                     | 2,724  |                                       | 4,918  |                               | 3,125   |                           |       |                                   | 10,767 
|                                                 |                                                                    |                                     |        |                                       |        |                               |         |                           |        |                                   |        

F-87

---



|2002
(in millions of [EURO])             |                                                        | DaimlerChrysler AG (parent company)        |         | DaimlerChrysler North America Holding |        | Other subsidiaries (combined) |          | Consolidating adjustments |          | DaimlerChrysler AG (consolidated) |         
|---------------------------------------- | ------------------------------------------------------ | ------------------------------------------ | ------- | ------------------------------------- | ------ | ----------------------------- | -------- | ------------------------- | -------- | --------------------------------- | --------
|Assets                                   |                                                        |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                         |                                                        | Intangible assets                          |         | 95                                    |        |                              |          | 4,831                     |          |                                  |         
|                                         |                                                        | Property, plant and equipment, net         |         | 5,973                                 |        |                              |          | 30,296                    |          |                                  |         
|                                         |                                                        | Investments and long-term financial assets |         | 27,736                                |        | 52,331                        |          | 12,684                    |          | (83,460                           | )       
|                                         |                                                        | Equipment on operating leases, net         |         | 3,722                                 |        |                              |          | 24,713                    |          | (192                              | )       
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                         | Fixed assets                                           |                                            | 37,526  |                                       | 52,331 |                               | 72,524   |                           | (83,652  | )                                 | 78,729  
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                         |                                                        | Inventories                                |         | 5,750                                 |        |                              |          | 10,638                    |          | (746                              | )       
|                                         |                                                        | Trade, finance and other receivables       |         | 15,920                                |        | 4,517                         |          | 71,591                    |          | (16,070                           | )       
|                                         |                                                        | Securities                                 |         | 369                                   |        | 318                           |          | 2,606                     |          |                                  |         
|                                         |                                                        | Cash and cash equivalents                  |         | 3,100                                 |        | 3,982                         |          | 2,048                     |          |                                  |         
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                         | Non-fixed assets                                       |                                            | 25,139  |                                       | 8,817  |                               | 86,883   |                           | (16,816  | )                                 | 104,023 
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                         | Deferred taxes and prepaid expenses                    |                                            | 2,881   |                                       | 552    |                               | 8,601    |                           | (7,459   | )                                 | 4,575   
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                         | Total assets                                           |                                            | 65,546  |                                       | 61,700 |                               | 168,008  |                           | (107,927 | )                                 | 187,327 
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|Liabilities and stockholders' equity     |                                                        |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                         | Stockholders' equity                                   |                                            | 35,004  |                                       | 11,010 |                               | 66,573   |                           | (77,583  | )                                 | 35,004  
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                         | Minority interests                                     |                                            |        |                                       |       |                               | 432      |                           |         |                                   | 432     
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                         | Accrued liabilities                                    |                                            | 10,831  |                                       | 158    |                               | 32,927   |                           | (294     | )                                 | 43,622  
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                         |                                                        | Financial liabilities                      |         | 11,838                                |        | 48,427                        |          | 37,974                    |          | (18,956                           | )       
|                                         |                                                        | Trade liabilities                          |         | 3,279                                 |        |                              |          | 8,892                     |          |                                  |         
|                                         |                                                        | Other liabilities                          |         | 1,675                                 |        | 2,105                         |          | 8,386                     |          | (3,323                            | )       
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                         | Liabilities                                            |                                            | 16,792  |                                       | 50,532 |                               | 55,252   |                           | (22,279  | )                                 | 100,297 
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                         | Deferred taxes and deferred income                     |                                            | 2,919   |                                       |       |                               | 12,824   |                           | (7,771   | )                                 | 7,972   
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                         | Total liabilities                                      |                                            | 30,542  |                                       | 50,690 |                               | 101,435  |                           | (30,344  | )                                 | 152,323 
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                         | Total liabilities and stockholders' equity             |                                            | 65,546  |                                       | 61,700 |                               | 168,008  |                           | (107,927 | )                                 | 187,327 
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                         | Revenues                                               |                                            | 55,430  |                                       |       |                               | 130,202  |                           | (38,264  | )                                 | 147,368 
|                                         | Cost of sales                                          |                                            | (43,890 | )                                     |       |                               | (113,123 | )                         | 37,389   |                                   | (119,624
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|Gross margin                             |                                                        | 11,540                                     |         |                                      |        | 17,079                        |          | (875                      | )        | 27,744                            |         
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                         | Selling, administrative and other expenses             |                                            | (6,830  | )                                     | (16    | )                             | (12,279  | )                         | 959      |                                   | (18,166 
|                                         | Research and development                               |                                            | (3,272  | )                                     |       |                               | (2,778   | )                         | 108      |                                   | (5,942  
|                                         | Other income                                           |                                            | 556     |                                       |       |                               | 912      |                           | (691     | )                                 | 777     
|                                         | Turnaround plan expenses  Chrysler Group              |                                            |        |                                       |       |                               | (694     | )                         |         |                                   | (694    
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|Income (loss) before financial income    |                                                        | 1,994                                      |         | (16                                   | )      | 2,240                         |          | (499                      | )        | 3,719                             |         
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                         | Financial income (expense), net                        |                                            | 3,529   |                                       | 334    |                               | 4,297    |                           | (5,954   | )                                 | 2,206   
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|Income (loss) before income taxes        |                                                        | 5,523                                      |         | 318                                   |        | 6,537                         |          | (6,453                    | )        | 5,925                             |         
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                         | Income taxes                                           |                                            | (728    | )                                     | 730    |                               | (1,308   | )                         | 191      |                                   | (1,115  
|                                         | Minority interests                                     |                                            |        |                                       |       |                               | (15      | )                         |         |                                   | (15     
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|Income (loss) from continuing operations |                                                        | 4,795                                      |         | 1,048                                 |        | 5,214                         |          | (6,262                    | )        | 4,795                             |         
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                         | Income from discontinued operations                    |                                            | 82      |                                       |       |                               | 82       |                           | (82      | )                                 | 82      
|                                         | Cumulative effects of changes in accounting principles |                                            | (159    | )                                     |       |                               | (159     | )                         | 159      |                                   | (159    
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|Net income (loss)                        |                                                        | 4,718                                      |         | 1,048                                 |        | 5,137                         |          | (6,185                    | )        | 4,718                             |         
|                                         |                                                        |                                            |         |                                       |        |                               |          |                           |          |                                   |         

F-88

---

|2002
(in millions of [EURO])                     |                                                                    | DaimlerChrysler AG (parent company) |        | DaimlerChrysler North America Holding |        | Other subsidiaries (combined) |         | Consolidating adjustments |        | DaimlerChrysler AG (consolidated) |        
|------------------------------------------------ | ------------------------------------------------------------------ | ----------------------------------- | ------ | ------------------------------------- | ------ | ----------------------------- | ------- | ------------------------- | ------ | --------------------------------- | -------
|Cash provided by (used for) operating activities |                                                                    | 7,434                               |        | 484                                   |        | 13,219                        |         | (3,121                    | )      | 18,016                            |        
|                                                 |                                                                    |                                     |        |                                       |        |                               |         |                           |        |                                   |        
|                                                 | Increase in equipment on operating leases                          |                                     | (2,682 | )                                     |       |                               | (15,175 | )                         | 153    |                                   | (17,704
|                                                 | Purchases of property, plant, equipment and other fixed assets     |                                     | (2,235 | )                                     |       |                               | (5,225  | )                         |       |                                   | (7,460 
|                                                 | Proceeds from disposals of equipment on operating leases           |                                     | 2,150  |                                       |       |                               | 12,962  |                           |       |                                   | 15,112 
|                                                 | Proceeds from disposals of fixed assets                            |                                     | 197    |                                       |       |                               | 681     |                           |       |                                   | 878    
|                                                 | Payments for investments in businesses                             |                                     | (331   | )                                     |       |                               | (405    | )                         | 176    |                                   | (560   
|                                                 | Proceeds from disposals of businesses                              |                                     | 292    |                                       |       |                               | 5,570   |                           | (176   | )                                 | 5,686  
|                                                 | (Increase) decrease in receivables from financial services, net    |                                     | (116   | )                                     |       |                               | (8,942  | )                         | 9      |                                   | (9,049 
|                                                 | Disposition (acquisitions) of securities (other than trading), net |                                     | (14    | )                                     | (353   | )                             | 438     |                           |       |                                   | 71     
|                                                 | Other                                                              |                                     | (239   | )                                     | 454    |                               | 230     |                           | (365   | )                                 | 80     
|                                                 |                                                                    |                                     |        |                                       |        |                               |         |                           |        |                                   |        
|Cash used for investing activities               |                                                                    | (2,978                              | )      | 101                                   |        | (9,866                        | )       | (203                      | )      | (12,946                           | )      
|                                                 |                                                                    |                                     |        |                                       |        |                               |         |                           |        |                                   |        
|                                                 | Change in financial liabilities                                    |                                     | (2,763 | )                                     | (1,195 | )                             | 2,130   |                           | (2,647 | )                                 | (4,475 
|                                                 | Dividends paid                                                     |                                     | (1,003 | )                                     |       |                               | (7,015  | )                         | 7,003  |                                   | (1,015 
|                                                 | Other                                                              |                                     |       |                                       |       |                               | 1,032   |                           | (1,032 | )                                 |       
|                                                 |                                                                    |                                     |        |                                       |        |                               |         |                           |        |                                   |        
|Cash provided by (used for) financing activities |                                                                    | (3,766                              | )      | (1,195                                | )      | (3,853                        | )       | 3,324                     |        | (5,490                            | )      
|                                                 |                                                                    |                                     |        |                                       |        |                               |         |                           |        |                                   |        
|Effect of foreign exchange rate changes on cash  |                                                                    |                                    |        | (801                                  | )      | (394                          | )       |                          |        | (1,195                            | )      
|                                                 |                                                                    |                                     |        |                                       |        |                               |         |                           |        |                                   |        
|Net increase (decrease) in cash and cash equiv.  |                                                                    | 690                                 |        | (1,411                                | )      | (894                          | )       |                          |        | (1,615                            | )      
|                                                 |                                                                    |                                     |        |                                       |        |                               |         |                           |        |                                   |        
|Cash and cash equivalents                        |                                                                    |                                     |        |                                       |        |                               |         |                           |        |                                   |        
|                                                 | At beginning of period                                             |                                     | 2,410  |                                       | 5,393  |                               | 2,912   |                           |       |                                   | 10,715 
|                                                 |                                                                    |                                     |        |                                       |        |                               |         |                           |        |                                   |        
|                                                 | At end of period                                                   |                                     | 3,100  |                                       | 3,982  |                               | 2,018   |                           |       |                                   | 9,100  
|                                                 |                                                                    |                                     |        |                                       |        |                               |         |                           |        |                                   |        

F-89

---



|2001
(in millions of [EURO])                         |                                                                    | DaimlerChrysler AG (parent company) |         | DaimlerChrysler North America Holding |        | Other subsidiaries (combined) |          | Consolidating adjustments |         | DaimlerChrysler AG (consolidated) |         
|---------------------------------------------------- | ------------------------------------------------------------------ | ----------------------------------- | ------- | ------------------------------------- | ------ | ----------------------------- | -------- | ------------------------- | ------- | --------------------------------- | --------
|                                                     | Revenues                                                           |                                     | 54,638  |                                       |       |                               | 133,588  |                           | (37,840 | )                                 | 150,386 
|                                                     | Cost of sales                                                      |                                     | (42,464 | )                                     |       |                               | (121,344 | )                         | 37,561  |                                   | (126,247
|                                                     |                                                                    |                                     |         |                                       |        |                               |          |                           |         |                                   |         
|Gross margin                                         |                                                                    | 12,174                              |         |                                      |        | 12,244                        |          | (279                      | )       | 24,139                            |         
|                                                     | Selling, administrative and other expenses                         |                                     | (6,454  | )                                     | (25    | )                             | (12,507  | )                         | 751     |                                   | (18,235 
|                                                     | Research and development                                           |                                     | (2,821  | )                                     |       |                               | (3,122   | )                         | 95      |                                   | (5,848  
|                                                     | Other income                                                       |                                     | 393     |                                       |       |                               | 1,395    |                           | (587    | )                                 | 1,201   
|                                                     | Turnaround plan expenses  Chrysler Group                          |                                     |        |                                       |       |                               | (3,064   | )                         |        |                                   | (3,064  
|                                                     |                                                                    |                                     |         |                                       |        |                               |          |                           |         |                                   |         
|Income (loss) before financial income                |                                                                    | 3,292                               |         | (25                                   | )      | (5,054                        | )        | (20                       | )       | (1,807                            | )       
|                                                     | Financial income (expense), net                                    |                                     | (3,247  | )                                     | (5,190 | )                             | 3,094    |                           | 5,496   |                                   | 153     
|                                                     |                                                                    |                                     |         |                                       |        |                               |          |                           |         |                                   |         
|Income (loss) before income taxes                    |                                                                    | 45                                  |         | (5,215                                | )      | (1,960                        | )        | 5,476                     |         | (1,654                            | )       
|                                                     | Income taxes                                                       |                                     | (808    | )                                     | 1,073  |                               | 1,299    |                           | (715    | )                                 | 849     
|                                                     | Minority interests                                                 |                                     |        |                                       |       |                               | 42       |                           |        |                                   | 42      
|                                                     |                                                                    |                                     |         |                                       |        |                               |          |                           |         |                                   |         
|Income (loss) from continuing operations             |                                                                    | (763                                | )       | (4,142                                | )      | (619                          | )        | 4,761                     |         | (763                              | )       
|                                                     | Income from discontinued operations                                |                                     | 101     |                                       |       |                               | 101      |                           | (101    | )                                 | 101     
|                                                     |                                                                    |                                     |         |                                       |        |                               |          |                           |         |                                   |         
|Net income (loss)                                    |                                                                    | (662                                | )       | (4,142                                | )      | (518                          | )        | 4,660                     |         | (662                              | )       
|                                                     |                                                                    |                                     |         |                                       |        |                               |          |                           |         |                                   |         
|Cash provided by (used for) operating activities     |                                                                    | 3,892                               |         | (1,097                                | )      | 10,678                        |          | 2,011                     |         | 15,484                            |         
|                                                     |                                                                    |                                     |         |                                       |        |                               |          |                           |         |                                   |         
|                                                     | Increase in equipment on operating leases                          |                                     | (2,496  | )                                     |       |                               | (15,470  | )                         | 15      |                                   | (17,951 
|                                                     | Purchases of property, plant, equipment and other fixed assets     |                                     | (1,987  | )                                     |       |                               | (7,619   | )                         | 55      |                                   | (9,551  
|                                                     | Proceeds from disposals of equipment on operating leases           |                                     | 1,986   |                                       |       |                               | 9,056    |                           |        |                                   | 11,042  
|                                                     | Proceeds from disposals of fixed assets                            |                                     | 322     |                                       |       |                               | 776      |                           | (55     | )                                 | 1,043   
|                                                     | Payments for investments in businesses                             |                                     | (1,473  | )                                     |       |                               | (141     | )                         | 793     |                                   | (821    
|                                                     | Proceeds from disposals of businesses                              |                                     | 881     |                                       |       |                               | 1,592    |                           | (793    | )                                 | 1,680   
|                                                     | (Increase) decrease in receivables from financial services, net    |                                     | 3       |                                       |       |                               | (1,048   | )                         | 95      |                                   | (950    
|                                                     | Disposition (acquisitions) of securities (other than trading), net |                                     | 88      |                                       | 2      |                               | 1,290    |                           |        |                                   | 1,380   
|                                                     | Other                                                              |                                     | (154    | )                                     | (1,292 | )                             | (5,862   | )                         | 7,450   |                                   | 142     
|                                                     |                                                                    |                                     |         |                                       |        |                               |          |                           |         |                                   |         
|Cash used for investing activities                   |                                                                    | (2,830                              | )       | (1,290                                | )      | (17,426                       | )        | 7,560                     |         | (13,986                           | )       
|                                                     |                                                                    |                                     |         |                                       |        |                               |          |                           |         |                                   |         
|                                                     | Change in financial liabilities                                    |                                     | 2,198   |                                       | 5,649  |                               | 6,428    |                           | (10,058 | )                                 | 4,217   
|                                                     | Dividends paid                                                     |                                     | (2,358  | )                                     |       |                               | (1,967   | )                         | 1,958   |                                   | (2,367  
|                                                     | Other                                                              |                                     |        |                                       |       |                               | 1,480    |                           | (1,471  | )                                 | 9       
|                                                     |                                                                    |                                     |         |                                       |        |                               |          |                           |         |                                   |         
|Cash provided by (used for) financing activities     |                                                                    | (160                                | )       | 5,649                                 |        | 5,941                         |          | (9,571                    | )       | 1,859                             |         
|                                                     |                                                                    |                                     |         |                                       |        |                               |          |                           |         |                                   |         
|Effect of foreign exchange rate changes on cash      |                                                                    |                                    |         | 163                                   |        | 113                           |          |                          |         | 276                               |         
|                                                     |                                                                    |                                     |         |                                       |        |                               |          |                           |         |                                   |         
|Net increase (decrease) in cash and cash equivalents |                                                                    | 902                                 |         | 3,425                                 |        | (694                          | )        |                          |         | 3,633                             |         
|                                                     |                                                                    |                                     |         |                                       |        |                               |          |                           |         |                                   |         
|Cash and cash equivalents                            |                                                                    |                                     |         |                                       |        |                               |          |                           |         |                                   |         
|                                                     | At beginning of period                                             |                                     | 1,508   |                                       | 1,968  |                               | 3,606    |                           |        |                                   | 7,082   
|                                                     |                                                                    |                                     |         |                                       |        |                               |          |                           |         |                                   |         
|                                                     | At end of period                                                   |                                     | 2,410   |                                       | 5,393  |                               | 2,912    |                           |        |                                   | 10,715  
|                                                     |                                                                    |                                     |         |                                       |        |                               |          |                           |         |                                   |         

F-90

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INDEX OF EXHIBITS

|                                                                                                                                                                                                                       |  | Exhibit
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------
|Memorandum and Articles of Association of DaimlerChrysler AG as amended to date                                                                                                                                        |  | 1.1    
|Certification of the Chairman of the Board of Management Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                     |  | 12.1   
|Certification of the Member of the Board of Management Responsible for Finance & Controlling Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                 |  | 12.2   
|Certification Pursuant to 18. U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                |  | 13.1   
|Independent Auditors' Consent of KPMG Deutsche Treuhand-Gesellschaft AG                                                                                                                                                |  | 14.1   
|Declaration by the Board of Management and Supervisory Board of DaimlerChrysler AG pursuant to § 161 Joint Stock Corporation Act (AktG) regarding to the German Corporate Governance Code in effect as of May 21, 2003 |  | 99.1   
|Letter from the German Secretary of Transport, Building and Housing to the members of the Toll Collect consortium, dated February 17, 2004                                                                             |  | 99.2   

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