As filed with the Securities and Exchange Commission on March 6, 2006



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, 2005
Commission file number 1-12356

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DAIMLERCHRYSLERAG

(Exact name of Registrant as specified in its charter)

DAIMLERCHRYSLERAG

(Translation of Registrant's name into English)

FEDERAL REPUBLIC OF GERMANY

(Jurisdiction of incorporation or organization)

EPPLESTRASSE 225, 70567 STUTTGART, 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   |                                                                                                                           
|                                                  | 73/8% 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. . . . . . . . . 1,018,172,696

(as
of December 31, 2005)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act.

Yes /X/

No / /


If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934.

Yes / /

No /X/


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 whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer" in Rule 12b-2 of the Exchange Act.

|Large accelerated filer /X/ |  | Accelerated filer / / |  | Non-accelerated filer / /
|--------------------------- |  | --------------------- |  | -------------------------

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

Item 17 / /

Item 18 /X/


If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes / /

No /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                                  |  | 11  
|         |  | Mercedes Car Group                                                |  | 11  
|         |  | Chrysler Group                                                    |  | 15  
|         |  | Commercial Vehicles                                               |  | 18  
|         |  | Financial Services                                                |  | 22  
|         |  | Other Activities                                                  |  | 24  
|         |  | Supplies and Raw Materials                                        |  | 26  
|         |  | Government Regulation and Environmental Matters                   |  | 27  
|         |  | Description of Property                                           |  | 32  
|Item 4A. |  | Unresolved Staff Comments                                         |  | 35  
|Item 5.  |  | Operating and Financial Review and Prospects                      |  | 35  
|         |  | Introduction                                                      |  | 35  
|         |  | New Accounting Pronouncements Not Yet Adopted                     |  | 36  
|         |  | Inflation                                                         |  | 36  
|         |  | Critical Accounting Policies                                      |  | 36  
|         |  | Operating Results                                                 |  | 45  
|         |  | Information about Operating Profit                                |  | 45  
|         |  | Overview of Business Segment Revenues and Operating Profit (Loss) |  | 47  
|         |  | 2005 Compared With 2004                                           |  | 49  
|         |  | 2004 Compared With 2003                                           |  | 55  
|         |  | Liquidity and Capital Resources                                   |  | 63  
|         |  | Off-Balance Sheet Arrangements                                    |  | 72  
|         |  | Research and Development                                          |  | 76  
|Item 6.  |  | Directors, Senior Management and Employees                        |  | 77  
|         |  | Supervisory Board                                                 |  | 77  
|         |  | Board of Management                                               |  | 82  
|         |  | Compensation                                                      |  | 84  
|         |  | Employees and Labor Relations                                     |  | 86  
|         |  | Share Ownership                                                   |  | 88  
|Item 7.  |  | Major Shareholders and Related Party Transactions                 |  | 88  
|Item 8.  |  | Financial Information                                             |  | 90  
|         |  | Consolidated Financial Statements                                 |  | 90  
|         |  | Other Financial Information                                       |  | 90  
|         |  | Export Sales                                                      |  | 90  
|         |  | Legal Proceedings                                                 |  | 90  
|         |  | Dividend Policy                                                   |  | 96  
|Item 9.  |  | The Offer and Listing                                             |  | 96  
|         |  |                                                                   |  |     

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|Item 10.  |  | Additional Information                                                       |  | 98 
|--------- |  | ---------------------------------------------------------------------------- |  | ---
|          |  | Options to Purchase Securities from Registrant or Subsidiaries               |  | 98 
|          |  | Memorandum and Articles of Association                                       |  | 99 
|          |  | Exchange Controls                                                            |  | 104
|          |  | Taxation                                                                     |  | 104
|          |  | Documents on Display                                                         |  | 107
|Item 11.  |  | Quantitative and Qualitative Disclosures About Market Risk                   |  | 108
|          |  | Exchange Rate Risk                                                           |  | 108
|          |  | Interest Rate Risk                                                           |  | 110
|          |  | Equity Price Risk                                                            |  | 110
|          |  | Commodity Price Risk                                                         |  | 111
|Item 12.  |  | Description of Securities Other than Equity Securities                       |  | 111
|PART II  
|Item 13.  |  | Defaults, Dividend Arrearages and Delinquencies                              |  | 112
|Item 14.  |  | Material Modifications to the Rights of Security Holders and Use of Proceeds |  | 112
|Item 15.  |  | Controls and Procedures                                                      |  | 112
|Item 16A. |  | Audit Committee Financial Expert                                             |  | 113
|Item 16B. |  | Code of Ethics                                                               |  | 113
|Item 16C. |  | Principal Accountant Fees and Services                                       |  | 113
|Item 16D. |  | Exemptions from the Listing Standards for Audit Committees                   |  | 114
|Item 16E. |  | Purchases of Equity Securities by the Issuer and Affiliated Purchasers       |  | 115
|PART III 
|Item 17.  |  | Financial Statements                                                         |  | 116
|Item 18.  |  | Financial Statements                                                         |  | 116
|Item 19.  |  | Exhibits                                                                     |  | 116

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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 materialize, 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, in this annual report, "we," "us," "our," "DaimlerChrysler," the "DaimlerChrysler Group" or the "Group" refers to DaimlerChrysler AG
and its consolidated subsidiaries, or any one or more of them, as the context may require.

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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 consolidated financial statements for the years ended
December 31, 2005, 2004, 2003, 2002, and 2001. We prepared the audited consolidated financial statements included in this annual report (Consolidated Financial Statements) in accordance with
generally accepted accounting principles in the United States of America which we refer to as U.S. GAAP. Our financial statements are denominated in euros, which is the currency of our home country,
Germany.

You
should read the table together with our Consolidated Financial Statements and the discussion in "Item 5. Operating and Financial Review and Prospects."

2

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|                                                                                                           |                                   | Year Ended December 31, |        
|---------------------------------------------------------------------------------------------------------- | --------------------------------- | ----------------------- | -------
|
|
|Income Statement Data:                                                                                     |                                   |                         |        
|Revenues                                                                                                   |                                   | €149,776                |        
|Income (loss) before financial income                                                                      |                                   | 3,221                   |        
|Income (loss) from continuing operations and before cumulative effects of changes in accounting principles |                                   | 2,851                   |        
|                                                                                                           | Basic earnings (loss) per share   |                         | 2.80   
|                                                                                                           | Diluted earnings (loss) per share |                         | 2.80   
|Income from discontinued operations                                                                        |                                   |                        |        
|Income on disposal of discontinued operations                                                              |                                   |                        |        
|Total income from discontinued operations including net gain on disposals                                  |                                   |                        |        
|                                                                                                           | Basic earnings per share          |                         |       
|                                                                                                           | Diluted earnings per share        |                         |       
|Net income (loss)                                                                                          |                                   | 2,846                   |        
|                                                                                                           | Basic earnings (loss) per share   |                         | 2.80   
|                                                                                                           | Diluted earnings (loss) per share |                         | 2.80   
|Balance Sheet Data (end of period):                                                                        |                                   |                         |        
|Total assets                                                                                               |                                   | €201,632                |        
|Short-term financial liabilities                                                                           |                                   | 36,483                  |        
|Long-term financial liabilities                                                                            |                                   | 44,449                  |        
|Capital stock                                                                                              |                                   | 2,647                   |        
|Stockholders' equity                                                                                       |                                   | 36,449                  |        
|Other Data:                                                                                                |                                   |                         |        
|Weighted average number of shares outstanding                                                              |                                   |                         |        
|                                                                                                           | Basic                             |                         | 1,014.7
|                                                                                                           | Diluted                           |                         | 1,017.7
|Dividend per share (euro)                                                                                  |                                   | 1.50                    | 4      
|Dividend per share (U.S. dollar)5                                                                          |                                   | 1.79                    | 4      

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Exchange Rate Information

The following table shows high and low or average noon buying rates for euros for the periods shown, based on rates certified by the Federal Reserve Bank of New
York for customs purposes.

Year

High

Low(in $ per €)2006February (through February 10, 2006)

1.2100

1.1920January

1.2287

1.19802005December

1.2041

1.1699November

1.2067

1.1667October

1.2148

1.1914September

1.2538

1.2011August

1.2434

1.2147July

1.2200

1.1917Average12005



1.24002004



1.24782003



1.14112002



0.94952001



0.8909


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On February 10, 2006, the noon buying rate for €1 was $1.1920.

Fluctuations
in the exchange rate between the euro and the U.S. dollar will affect the U.S. 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 U.S. dollar amount
received by shareholders who elect to convert cash dividends declared in euro into U.S. dollars. Please refer to "Item 5. Operating and Financial Review and Prospects" and "Item 11. Quantitative and
Qualitative Disclosures About Market Risk" for information on how exchange rate fluctuations affect our businesses and operations. In those sections, you can also find a discussion of the hedging
techniques we use to manage our exposure to exchange rate fluctuations.

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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 decline in 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.

Any
of several factors could contribute to a decline in demand for our passenger cars and commercial vehicles in the United States or Western Europe. For example, the U.S. economy
increasingly requires significant capital inflow from non-U.S. investors to finance its large current account deficit. A pronounced decline in demand for U.S. dollar denominated
investments could lead to a sharp depreciation of the U.S. dollar and force the United States to raise its key interest rates. The latter would increase capital costs and likely reduce demand for
vehicles. A drop in economic growth in Western Europe, on the other hand, could result not only from any structural weakness or a decline in domestic demand in major European economies, but also from
a decline in the U.S. economy resulting in less demand for European goods and services in the U.S.

Continued
rising energy costs or sustained high energy prices, especially for crude oil, could significantly influence worldwide consumption and investment or lead to declines in demand
if central banks try to limit inflationary pressure by substantially increasing interest rates. Both events may adversely impact automotive sales. Rising energy costs can lead to a shift to smaller,
lighter, more fuel-efficient cars, which generally provide a lower gross margin than larger vehicles, as well as deferral of purchases.

Since
we derive substantial revenues from the United States and Western Europe, the occurrence of any of these events, or other events that threaten consumer and investor confidence
(international disputes, political instability, terrorism, etc.) may significantly adversely affect our future sales, operating results and cash flows.

In
addition, an economic decline in the Asian economies could not only negatively affect future business prospects of our subsidiary Mitsubishi Fuso Truck and Bus Corporation and our
Mercedes-Benz passenger car sales, but also our long-term strategic expansion plans for growth in Asian markets. An economic downturn in China, in particular, could delay that
expansion and could adversely impact our existing activities in these markets. Moreover, deteriorating economic conditions in Asia, especially if
coupled with depreciating 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 local and regional adverse economic and political
developments. Some of the countries in those regions may experience severe economic contraction or currency fluctuation, which could adversely affect domestic demand in those and neighboring countries
as well as our production facilities. For example, our Commercial Vehicles segment maintains production facilities and sells significant numbers of vehicles in Turkey and in several South American
countries, some of which have experienced such conditions in the recent past.

Demand
for motor vehicles could also be affected by the political and regulatory environment in the markets in which we operate. For example, a discord in international trade relations
and the implementation of new tariff or non-tariff trade barriers could negatively affect our global sales and procurement activities as well as expansion plans in affected areas. The
proliferation of bilateral free trade agreements between third party countries could negatively affect our position in those foreign markets, especially in Southeast Asia where Japan increasingly
gains preferential market access.

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Overcapacity and intense competition in the automotive industry create 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 or
increase sales incentives. Our ability to improve or maintain our profitability depends, among other things, on the successful implementation of cost reduction programs or efficiency optimizations,
including achievement of sustainable price reductions from suppliers. Our ability to achieve such price reductions from suppliers may be limited by a combination of factors including consolidation
among automotive suppliers, the use of a single supplier for certain components, and increasing supplier insolvencies. In addition, the Chrysler Group faces renewed pressure to continue its cost
reduction efforts in light of the plans announced by some of its major competitors in the NAFTA region over the past several months relating to plant closures, workforce reductions and labor costs.

In
addition, if we are unable to continue to provide competitive sales incentives, customers may elect to purchase competitors' products and our future profitability may suffer. 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. Sales
incentives have become more common in West European markets as well. Sales incentives in the new vehicle business also influence the price level of used vehicles, which could adversely affect the
profitability of our used vehicle sales and, indirectly, the profitability of our future new vehicle sales.

High commodities prices and increased pressure on our suppliers could negatively impact our profitability.

The
rising demand in the worldwide commodities markets for raw materials that we use in our production process, such as steel and petroleum based products, have led to price increases in
such materials. Continued high prices or further price increases for raw materials will lead to higher component and production costs that could in turn negatively impact our future operating results,
profitability and cash flows because we may not be able to pass all of those costs on to our customers or suppliers.

Additionally,
the intense competition in the automotive industry is having a significant adverse effect on the financial position and business continuity of key suppliers. In 2005, there
has been an increase in bankruptcies and other signs of financial distress among automotive suppliers. We could be severely impacted if a supplier is unable to meet our production requirements due to
its financial condition or otherwise. We have provided, and in the future may be required to provide, financial support to suppliers in order to avoid prolonged interruption in the supply of
components, which could negatively impact our profitability.

Risks arising from our leasing and sales financing business may adversely affect our future operating results and cash flows.

The
financial services we offer in connection with the sale of vehicles involve several risks, including higher refinancing costs, and the potential inability to recover our investments
in leased vehicles and to collect our sales financing receivables. If any of these risks materialize, our future operating results, financial condition and cash flows could be adversely affected. For
instance, our ability to recover our investments in leased vehicles may deteriorate as a result of a decline in resale prices of used vehicles. Our ability to collect our sales financing receivables
could be negatively impacted by consumer and dealer insolvencies.

New
vehicle sales incentives indirectly lower the resale prices of used vehicles. A decline in resale prices of used vehicles could in turn result in downward pressure on the carrying
values of leased vehicles and negatively affect the collateral value of our sales financing and finance lease receivables.

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

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Our future profitability will depend on the ability to offer competitive prices while maintaining a high level of product quality.

Product
quality significantly influences the consumer's decision to purchase passenger cars and commercial vehicles. Reductions in our product quality could severely tarnish our image as
a manufacturer and thereby negatively affect our future sales and, as a consequence, our future operating results and cash flows. Consumers, however, increasingly react more sensitively to pricing,
which may result in continued or intensified pricing pressures which may limit our ability to pass price increases on to customers. Our attempts to reduce costs along the automotive value chain may
place additional cost and pricing pressure on suppliers, which can also negatively affect product quality.

Additionally,
component parts or assembly defects could require us to undertake service actions and recall campaigns, or even to develop new technical solutions requiring regulatory
certification prior to implementation. We may need to expend considerable resources for these remediation measures, resulting in higher accruals for new warranties issued and expenses in excess of
accrued liabilities for product guarantees previously issued.

Our future success depends on our ability to offer innovative new 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 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 a lack of market acceptance of our new models would adversely affect our financial condition, results of
operations and cash flows.

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 regulations 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 is significant, and we
expect to incur higher compliance costs in the future. New legislation may subject us to additional expense in the future, which could be significant.

Risks arising from contingent obligations could affect us adversely.

We sometimes provide guarantees for third party liabilities, principally in connection with 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 and performance guarantees
may expose us to financial risk. For example, as a result of the guarantees and other obligations DaimlerChrysler Financial Services undertook as one of the consortium members of Toll Collect, our
future operating results and cash flows may be materially adversely affected by penalties, damage claims and losses associated with an underperformance of the system or a delayed introduction of
additional system features. 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."

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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 U.S. dollar, the British pound, the Japanese yen and other world currencies against the euro. Moreover, 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 and we manage a substantial volume of interest rate sensitive assets and liabilities
in connection with our lease and sales financing business. Changes in currency exchange rates and interest rates may have substantial adverse effects on our operating results and cash flows. For
example, a strengthening of the euro against the U.S. dollar and other world currencies could significantly adversely affect our operating results and cash flows because a significant portion of our
business, primarily in the case of the Mercedes Car Group, depends in part on export sales to the United States. For more information on how changes in exchange rates and interest rates may impact our
operating results and cash flows, please refer to the discussion under the heading "Introduction" in "Item 5. Operating and Financial Review and Prospects" and to the discussion about market risk in
"Item 11. Qualitative and Quantitative Disclosures About Market Risk."

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

Downgrades by rating agencies may increase our cost of capital and, as a result, could 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, either of which would negatively affect our
operating results and cash flows.

We may need to make significant cash contributions or increase accruals with respect to the funding of our pension and other post-retirement benefit
plans. In addition, our total pension and other post-retirement benefit expense may increase.

Our pension and other post-retirement obligations are significant and are partially underfunded. The funded status of our off-balance
sheet pension and other post-retirement benefit plans is subject to changes in actuarial and other related assumptions and to actual developments.

Even
small changes in the assumptions which affect the benefit plan valuation, 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 in the value of the respective obligations, which would affect the reported funded status of our plans and, as a consequence,
could negatively affect our total pension and other post-retirement benefit expense in the following years.

Actual
developments, such as an unfavorable performance of capital markets  particularly with respect to equity securities  can result in
significant decreases in the market value of plan assets. This in turn would affect the reported funded status of our plans. In addition, lower plan assets or a decrease in the rate of expected return
on plan assets can result in higher pension and other post-retirement benefit expense in subsequent years.

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

8

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Consolidated
Financial Statements for additional information on pension and other post-retirement benefit 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 located 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 comprises the respective businesses, stockholder groups,
managements and other constituencies of Chrysler and Daimler-Benz.

Business Summary and Developments

DaimlerChrysler AG is the ultimate parent company of the DaimlerChrysler Group. The Group develops, manufactures, distributes and sells 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 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. At the beginning of 2005, we renamed our Services
segment the Financial Services segment to reflect its focus on providing automotive financial services. Our segments are:



On
January 24, 2006, we presented a new management model designed to improve our competitiveness and promote further profitable growth. The goal of the new model is to integrate
further our core functions, focus operations areas more closely on their core processes, encourage internal collaboration and reduce duplication of activities. As part of the program we expect to
eliminate approximately 6,000 jobs worldwide and reduce annual administrative expenses by approximately €1.5 billion, including €0.5 billion which we plan
to realize through other efficiency enhancement programs already in place.

As
part of the new management model, we also intend to change the composition of our business segments by reporting the van and bus business units with our Other Activities. As a result
of these changes, our Commercial Vehicles segment will be renamed the Truck Group.

9

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Preparations
for implementing the new management model are underway and we expect to fully implement it by 2008. We expect total expenditures for implementing the program to be
approximately €2 billion in the years 2006 through 2008.

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. Approximately 45% of
our 2005 revenues derive from sales in the United States, 14% from sales in Germany and 18% from sales in other countries of Western Europe.

In
recent years, we have also taken significant steps towards increasing further our presence in the Asian markets. For example, we acquired a majority interest in the Japanese truck
manufacturer Mitsubishi Fuso Truck and Bus Corporation and we entered into joint ventures with Chinese partners relating to the production of passenger cars and vans in China. In December 2005,
one of our joint ventures began to manufacture and distribute Mercedes-Benz E-Class and C-Class passenger cars. The production capacity of the joint venture is
20,000 units per year. The joint venture also continues to produce and sell passenger cars, such as the Jeep® Cherokee and Jeep® Grand Cherokee, under license agreements with
our subsidiary DaimlerChrysler Corporation. Another joint venture under review, which is still subject to approval by the relevant Chinese authorities, will manufacture and sell
Mercedes-Benz Vito/Viano and Sprinter vans. We expect production of these vans to commence in the second half of 2006 with a capacity of 40,000 units per year.

In
line with our strategy of concentrating on our automotive business and related services, we disposed of several non-core business assets and expanded our core automotive
activities over the past several years. In 2005, we concluded the following transactions:

Off-Highway.In December 2005, we agreed to sell substantially all of our Off-Highway business
to the Swedish investor group EQT. The sale includes the MTU-Friedrichshafen Group and the off-highway businesses of Detroit Diesel Corporation and DaimlerChrysler AG. We
expect to consummate the sale in 2006 and to achieve a net cash inflow of approximately €1.0 billion from this transaction.

MMC.In November 2005, we sold our remaining 12.4% interest in Mitsubishi Motors Corporation (MMC) for
€970 million.

MFTBC.Under the purchase agreements entered into in 2003 and 2004 with MMC regarding our acquisition of an aggregate 65% of
Mitsubishi Fuso Bus and Truck Company (MFTBC), we had the right to a purchase price adjustment if the warranty reserve on the books of MFTBC proved to be inadequate. During 2004 we discovered quality
issues that originated before we invested in MFTBC. In March 2005, we agreed on a settlement with MMC pursuant to which we received (1) MMC's remaining stake of 20% in MFTBC,
(2) a cash payment of €72 million, (3) promissory notes with an aggregate face value of €143 million, payable in four equal installments
over a four year period and (4) certain other assets and rights pertaining to the distribution of MFTBC products in one Asian market. As a result of the settlement, our controlling interest in
MFTBC increased from 65% to 85%. The aggregate purchase price for our equity interest in MFTBC after giving effect to the settlement was €1,014 million.

For
additional information on acquisitions and dispositions of businesses during the last three years, please refer to Note 4 to our Consolidated Financial Statements. For
additional information on these and other transactions and a discussion of their effect on revenues and operating results, please refer to "Operating Results" in "Item 5. Operating and Financial
Review and Prospects."

Our
aggregate capital expenditures for property, plant and equipment were €6.6 billion in 2005, €6.4 billion in 2004 and
€6.6 billion in 2003. In 2005, the United States and Germany accounted for 44% and 36% of these capital expenditures, respectively. Expenditures for equipment on operating
leases were €20.2 billion in 2005, €17.7 billion in 2004 and €15.6 billion in 2003. For additional information on our capital
expenditures, please refer to "Description of Business Segments" and "Description of Property" below.

10

---



Significant Subsidiaries

The following table shows the significant subsidiaries DaimlerChrysler AG owned, directly or indirectly, as of December 31, 2005:

|Name of Company                                                                             |                                                                                            | Percentage
Owned
|------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | ----------------
|DaimlerChrysler North America Holding Corporation, Auburn Hills, MI, a Delaware corporation |                                                                                            | 100.0           
|                                                                                            | DaimlerChrysler North America Finance Corporation, Newark, DE, a Delaware corporation      |                 
|                                                                                            | DaimlerChrysler Motors Company LLC, Auburn Hills, MI, a Delaware limited liability company |                 
|                                                                                            |                                                                                            |                 
|                                                                                            |                                                                                            |                 
|                                                                                            | Freightliner LLC, Portland, OR, a Delaware limited liability company                       |                 
|smart gmbh, registered in Böblingen, Germany                                                |                                                                                            | 100.0           

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

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 2005, the Mercedes Car Group contributed approximately 31% of our revenues.

In
2004, the Mercedes Car Group rolled out a broad quality improvement initiative which affected all Mercedes-Benz products. This initiative was followed in 2005 by CORE
(Cost down, Revenue up, Execution), a comprehensive program designed to increase earnings through increased sales, material- and fixed-cost reductions, quality improvements and improved
efficiencies, and to realign the smart business. With CORE we intend to improve our competitiveness and increase profitability with the goal of achieving a return on sales of 7% by 2007.

The
headcount reduction initiative currently under way at Mercedes Car Group is a result of the CORE program. The board of management set the personnel reduction target for the
Mercedes-Benz business unit at 8,500 jobs to be achieved through voluntary severance arrangements. As of year end 2005, approximately 5,000 employees had accepted voluntary severance
arrangements. We intend to complete these reductions in 2006. For additional information regarding these reductions and the realignment of the smart business, please refer to Note 5 to our
Consolidated Financial Statements. For additional information on the effect of these reductions and the realignment of the smart business on our operating results, please refer to "Operating Results"
under the heading "Item 5. Operating and Financial Review and Prospects" and to Note 35 to our Consolidated Financial Statements.



Mercedes-Benz passenger cars are world-renowned for innovative technology, highest levels of comfort, quality, safety, and pioneering design. We offer
most of our vehicles with a variety of diesel and gasoline

11

---



engines.
The availability of individual models differs by geographic market. The Mercedes-Benz passenger car product range consists of the following classes:

S-Class.The S-Class is a line of full-size luxury sedans. In September 2005, we
launched the all-new S-Class sedans S350 and S500.
Additional models, including the sportier AMG version, will complete the S-Class line-up and become available in 2006.

The
S-Class sedans are complemented by the CL, a top-of-the-line two-door coupe and the SL, a two-door
convertible. We intend to introduce an all-new CL coupe in the fall of 2006. We also offer a high performance Mercedes-Benz sports car, the SLR, through McLaren
Cars Ltd.

E-Class.The E-Class is a line of luxury sedans and station wagons. In mid-2006, we
intend to introduce a facelifted version of the E-Class sedans and station wagons.

We
also offer the CLS, a four-door coupe based on the E-Class platform. It 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. The C-Class
sports coupe, the SLK (a two-seat roadster) and the CLK coupe and convertible complement the C-Class product family.

A-/B-Class.The A-Class is a front wheel drive compact. In June 2005 we launched the all-new
B-Class, a front wheel drive 4-door Compact Sports Tourer (CST). We do not offer the A- and B-Class in the United States.

M-/R-/GL-Class.The M-Class is a line of sport utility vehicles with
permanent all-wheel drive. In mid-2005, we launched the successor of the first generation M-Class.

The
R-Class is an all-new Grand Sports Tourer (GST) which we launched in the United States in September 2005 and plan to offer in Europe in 2006.

In
2006, we intend to introduce the all-new GL-Class, a seven seat sport utility vehicle based on the M-Class.

G-Class.The G-Class is a four-wheel drive cross country vehicle that comes in a short
and a long wheelbase version and as a convertible. The long wheelbase version of the G 500 is also available in the United States.



The prestigious Maybach brand represents a line of exclusive high-end luxury sedans with unsurpassed luxury, comfort, and individuality. In 2005, we
launched the Maybach 57 S, a sportier version of the Maybach 57.



The smart brand is a micro compact car concept. We currently offer three models, the smart fortwo, the smart forfour, and the smart roadster. In 2005, we decided
to cease production of the smart roadster.



Markets.In 2005, the main markets of the Mercedes Car Group were Germany (29% of unit sales), the remainder of Western
Europe (35% of unit sales), the United States (19% of unit sales) and Japan (4% of unit sales). In Germany, new passenger car registrations for all manufacturers increased 1.6% to 3.3 million
units. In Western Europe (excluding Germany), new registrations of passenger cars decreased slightly 0.1% to 11.2 million units.

12

---



Sales.The following table shows the distribution of revenues and unit sales for our Mercedes Car Group segment by geographic
market since 2003:

Revenues and Unit Sales

Year Ended December 31,2005

% change

2004

% change

2003Revenues1Western Europe

29,103

-4

30,452

-4

31,558Germany

14,461

-8

15,760

-7

16,875Other

14,642

0

14,692

0

14,683NAFTA region

12,043

+6

11,381

-4

11,848United States

10,997

+5

10,477

-4

10,932Canada and Mexico

1,046

+16

904

-1

916Asia

5,531

+16

4,778

-6

5,100Japan

2,212

+11

1,996

-17

2,399Other

3,319

+19

2,782

+3

2,701Other markets

3,338

+11

3,019

+3

2,940World

50,015

+1

49,630

-4

51,446UnitsWestern Europe

776,600

-5

820,700

+1

812,900Germany

354,900

-8

386,900

-1

390,100Other

421,700

-3

433,800

+3

422,800NAFTA region

253,500

+6

239,900

+2

235,400United States

231,800

+4

222,500

+2

218,400Canada and Mexico

21,700

+25

17,400

+2

17,000Asia

107,700

+15

93,300

-3

96,000Japan

48,300

+17

41,400

-10

45,800Other

59,400

+14

51,900

+3

50,200Other markets

79,000

+8

72,900

0

72,600World

1,216,800

-1

1,226,800

+1

1,216,900


---

---

In 2005, worldwide unit sales of the Mercedes Car Group reached 1,216,800 compared to 1,226,800 in the prior year, a decrease of 1%. Sales of
A-/B-Class vehicles were particularly strong at 262,300 units due to the market introduction of the new A-Class in September 2004 and the all-new
B-Class in 2005. With 2005 sales of 264,900 units, the E-Class is still among the best selling vehicles in its segment. The S-Class also performed strongly in its
market segment, despite a decline in unit sales of 17% to 71,600 units. The decline was primarily the result of the model changeover to the new S-Class sedan launched in
September 2005. Sales of the M-/R-Class increased to 90,300 units due to the launch of the new M-Class model in April 2005 and the all-new
R-Class in October 2005. Unit sales of the C-Class declined to 398,000 units as the current model line approaches the end of its life cycle.

In
Germany, the Mercedes Car Group sold 354,900 units in 2005, 8% less than in 2004. Unit sales in Western Europe (excluding Germany) decreased by 3% to 421,700 units. In the United
States, the most important non-European market for Mercedes-Benz passenger cars, we sold 231,800 units in 2005, a 4% increase over the previous year. This increase resulted
primarily from the strong sales performance of the successful CLS and the new M-Class. Unit sales in Japan rose 17% to 48,300 units in a very difficult market. The positive sales
performance in Japan was mainly due to the introduction of the new A-Class and the CLS. In the rest of Asia (excluding Japan), we were able to surpass last year's sales level by 14% with
59,400 units. Sales performance in China was especially encouraging with an increase of more than 18%. For a discussion of changes in revenues, please refer to "Operating Results" in "Item 5.
Operating and Financial Review and Prospects."

13

---



The following table shows, by vehicle line, the number of units sold since 2003:

Year Ended December 31,2005

2004

2003UnitsS-Class (including CL-Class, SL-Class, Maybach, and SLR)

71,600

85,900

108,800E-Class (including CLS-Class)

264,900

294,200

305,300C-Class (including CLK-Class and SLK-Class)

398,000

474,800

442,100A-/B-Class

262,300

142,500

147,400M-/R-Class

90,300

70,900

81,200G-Class

5,400

6,400

7,400smart

124,300

152,100

124,700Total

1,216,800

1,226,800

1,216,900


---

Competition.In Western Europe, our Mercedes-Benz passenger cars principally compete with
products of BMW Group (BMW, 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 smart are certain models of Fiat, Ford, PSA (Peugeot/Citroen), Renault, Suzuki, Toyota (Daihatsu), BMW (Mini) and Volkswagen (Seat, Skoda, VW).



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. In
Europe and Canada, we also operate an increasing number of retail outlets, and are still in the process of establishing our own retail locations in select major European metropolitan areas. A wide
network of smart centers in 36 countries provides sales and repair services for our smart vehicles.

In
Europe and Asia we sell our Maybach sedans through Maybach centers exclusively dedicated to this luxury brand. In the United States we distribute the Maybach through select
Mercedes-Benz dealers.



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

Year Ended December 31,2005

2004

2003(€ in millions)Capital expenditures for fixed assets

1,629

2,343

2,939Research and development

2,418

2,634

2,687


---

14

---



Our Mercedes Car Group spent €1.6 billion on capital expenditures for fixed assets in 2005. Principal areas of investment
in 2005 were the preparation for production of the successor models of the S-Class sedan, the CL-Class, the C-Class successor, the new M-Class, the
all-new R-Class and the new GL-Class. Capital expenditures also included production equipment for manufacturing new engines and transmissions.

In
2005, research and development activities of the Mercedes Car Group related primarily to the development of new car models and new engines and transmissions. New car models under
development included the successor models of the S-Class sedan, the CL-Class, the E-Class and the C-Class as well as the all-new
R-Class and the new GL-Class. The development of a new world diesel engine and research and development work relating to alternative propulsion systems complemented the primary
research and development activities in 2005.

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., as well as other international automotive affiliates. These companies design, manufacture, assemble and sell cars and trucks under the brand names Chrysler,
Jeep® and Dodge. The Chrysler Group segment contributed approximately 33% of our revenues in 2005.



The Chrysler Group vehicles include full-size, mid-size and compact cars and standard and extended wheelbase minivans,
full-size and mid-size pick-up trucks, sport utility vehicles, full-size vans and models in the sports tourer segment. The Chrysler Group also sells
parts and accessories marketed under the MOPAR® brand name.

During
2005 and 2006, the Chrysler Group introduced or plans to introduce, among others, the following products:

Vehicle

Market Segment2005 Calendar Year Introductions.2006 Dodge Charger

Standard Full-Size Car2006 Jeep® Commander

Full-Size Sport Utility Vehicle2006 Dodge Viper SRT10 Coupe

Luxury Specialty2006 Dodge Ram Mega Cab

Large Pickup2006 Chrysler 300C SRT8

Luxury Full-Size Car2006 Dodge Magnum SRT8

Sports Tourer2006 Dodge Charger SRT8

Standard Full-Size Car2006 Calendar Year Introductions.2006 Jeep® Grand Cherokee SRT8

Full-Size Sport Utility Vehicle2007 Dodge Caliber

Compact Car2007 Jeep® Wrangler

Small Sport Utility Vehicle2007 Jeep® Compass

Mid-Size Sport Utility Vehicle2007 Chrysler Aspen

Full-Size Sport Utility Vehicle2007 Dodge Nitro

Mid-Size Sport Utility Vehicle


15

---





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

Revenues and Unit Sales

Year Ended December 31,2005

% change

2004

% change

2003Revenues1, 2NAFTA region

45,439

+1

45,183

0

45,044United States

39,652

-1

39,943

0

39,863Canada

4,183

+6

3,947

0

3,949Mexico

1,604

+24

1,293

+5

1,232Western Europe

2,842

-2

2,906

0

2,916Other markets

1,837

+30

1,409

+4

1,361World

50,118

+1

49,498

0

49,321Units2,3NAFTA region

2,637,800

+1

2,609,700

+6

2,457,800United States

2,305,400

+1

2,287,000

+7

2,128,600Canada

209,900

-1

212,300

-7

229,000Mexico

122,500

+11

110,400

+10

100,200Western Europe

97,200

-3

99,700

-9

109,200Other markets

78,000

+11

70,500

-1

70,900World

2,813,000

+1

2,779,900

+5

2,637,900


---

---

In the United States and Canada, the Chrysler Group sold 2,525,700 vehicles in the retail and fleet market in 2005, an increase of 4% from
2,421,900 vehicles in 2004. For 2005, this represents a 13.2% share of the United States and Canada car and truck market, compared to 12.8% in 2004. Industry retail and fleet sales in the United
States and Canada for 2005 were 19.1 million units, an increase of 1% from 2004.

In
2005, revenues of our Chrysler Group segment increased, primarily as a result of higher worldwide factory unit sales. Total factory unit sales increased by 1% to 2,813,000 primarily
as a result of the successful launch of new products. 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 vehicles are products of General Motors, Ford, Toyota, Honda and Nissan. Competition is likely to
intensify as new products and capacity in NAFTA are added by Asian and European manufacturers.

16

---



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

Year Ended December 31,2005

2004

2003Units1CarsNeon

130,100

141,700

153,600Sebring and Stratus Sedan, Convertible and Coupe

203,500

240,900

233,600Intrepid, Concorde and 300M



1,200

140,900Charger

75,600



300/300C

194,900

141,000

Crossfire

9,900

28,300

14,700PT Cruiser Convertible

14,200

34,200

Other

16,300

20,000

7,100Minivans

551,400

516,700

494,600Sports TourersPacifica

102,200

92,200

82,000Magnum

49,700

64,700

PT Cruiser

145,900

123,000

136,400TrucksRam Pick-up

444,800

517,800

508,300Dakota

106,400

127,700

122,500Durango

109,800

160,100

113,300Ram Van



3,300

20,100Sprinter Van

24,300

17,500

9,300Other2

13,100

1,800

5,300Jeep®Commander

49,000



Grand Cherokee

251,800

218,700

255,100Liberty/Cherokee

225,000

232,100

256,700Wrangler

95,100

97,000

84,400Total

2,813,000

2,779,900

2,637,900


---

---



The Chrysler Group sells vehicles, parts, and accessories to dealers in the NAFTA region, and to wholly owned, affiliated and independent distributors and dealers
in various other countries, for sale to retail and fleet customers. We had 3,892 dealers in the United States, 470 dealers in Canada, and 124 dealers in Mexico at December 31, 2005, compared to
3,997 dealers in the United States, 489 dealers in Canada, and 123 dealers in Mexico at December 31, 2004.

17

---





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 31,2005

2004

2003(€ in millions)Capital expenditures for fixed assets

3,083

2,647

2,487Research and development

1,710

1,570

1,689


---

In 2005, our Chrysler Group segment invested €3.1 billion in fixed assets. These capital expenditures related primarily to
new product programs, as well as to upgrading powertrains, enhancing flexible manufacturing capabilities and maintaining existing facilities.

Research
and development expenditures in 2005 were primarily for product development for vehicles launched in 2005 and for vehicles to be launched in future years. They also included
development costs for improving the quality, cost and performance of existing products.

Commercial Vehicles

We manufacture and sell commercial vehicles under the brand names Mercedes-Benz, Freightliner, Sterling, Mitsubishi Fuso, Setra, Thomas Built Buses,
Western Star and Orion. Our worldwide facilities provide us with a strong production and assembly network for commercial vehicles and core components. In 2005, the Commercial Vehicles segment
contributed approximately 26% of our total revenues. As part of the new management model described under the heading "Introduction," we intend to change the composition of our business segments by
reporting the van and bus business units with our Other Activities. As a result of these changes, our Commercial Vehicles segment will be renamed the Truck Group.



Vans.Worldwide, we currently offer four lines of Mercedes-Benz vans between 1.9 metric tons (t) and 7.5t
gross vehicle weight (GVW): the Sprinter, the Vito/Viano, the Vario and the compact multi purpose vehicle Vaneo. In the U.S. market we currently sell the Sprinter under the Freightliner and Dodge
brand names. We plan to introduce a new version of the Sprinter in the spring of 2006.

Trucks.Our current European Mercedes-Benz truck lines consist of the Actros and the Axor in the heavy duty
category, the Atego in the medium duty category, and the specialty vehicle Econic. Complementing our line-up is the Unimog, a four-wheel drive vehicle designed for special
purpose applications. In addition, we manufacture heavy and medium duty trucks for local and export markets in Turkey and Brazil.

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) and sells them under the
Freightliner, Sterling, Western Star, and Thomas Built Buses brand names, primarily in the NAFTA region. 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 2005, we sold our fire truck and rescue vehicles business which we conducted under the brand name American LaFrance.

Our
Japanese subsidiary MFTBC manufactures three lines of trucks and tractors, primarily for the Japanese and other Asian markets: the Canter trucks (light duty), the Fighter trucks
(medium duty), and the Super Great trucks (heavy duty). MFTBC also sells trucks in Western Europe and the United States. In 2006, we plan to launch the Canter Europe TD Euro 4 in European markets.

18

---



Buses.We are a full-line supplier in the worldwide bus and coach market. Our product portfolio includes
city-buses, coaches, interurban buses, midi buses and bus chassis. We sell completely built-up buses under the Mercedes-Benz and Setra brands in Europe and under
the Setra and Orion brand names in the United States and Canada. We also manufacture heavy, medium and small coaches, buses and bus chassis under the brand name Mitsubishi Fuso at MFTBC in Japan.

For
our commercial vehicles, we produce diesel engines, axles and transmissions under the Mercedes-Benz, Mitsubishi Fuso, Detroit Diesel and Axle Alliance Company brand
names.



Markets.The market for commercial vehicles depends to a large degree 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, South America and Asia. Economic conditions in all these regions improved in 2005, but the improvement in
the North American market was most pronounced.

In
Western Europe, commercial vehicle registrations for trucks (medium and heavy duty), vans (mid-size and large) and buses (heavy, over 8t GVW) increased 4% to 1,432,700
units. This increase was mainly driven by the medium and heavy-duty truck segments, which increased 6% from 302,200 to 321,600 units. The mid-size and large van segments in
Western Europe showed registration increases of 4% from 1,044,700 to 1,085,200 units, while registrations of heavy buses in that market remained virtually the same at 25,600 units (2004: 26,000).

In
Germany, commercial vehicle registrations for trucks (medium and heavy duty), vans (mid-size and large) and buses (heavy) increased 5% to 321,200 units. This increase was
mainly attributable to registrations in the medium and heavy-duty truck segment, which increased 6% to 81,600 units, in line with overall market growth.

In
the NAFTA region, retail sales for all manufacturers of trucks in Classes 5 through 8 reached 528,400 units, 17% more than in 2004. In the United States, retail sales of all
manufacturers in Classes 5 through 8 increased 17% from 384,600 units in 2004 to 448,100 units in 2005. Retail sales in the Class 5-7 truck segment rose from 181,400 units in 2004
to 195,300 units in 2005, while retail sales for all manufacturers in the Class 8 heavy duty truck category showed a strong increase of 24% from 203,200 units in 2004 to 252,800 units in 2005.

In
South America, demand went up in Argentina and Venezuela, particularly in the medium and heavy-duty truck market segments, resulting in an 11% increase in commercial
vehicle sales. Sales in Brazil remained on a high level.

In
Japan, sales of trucks and buses by all manufacturers decreased 3% to 264,300 units, reflecting accelerated purchases in 2004 related to new emission standards that became fully
effective during 2004.

19

---



Sales.The following table shows the distribution of revenues and unit sales of our Commercial Vehicles segment by geographic
market since 2003:

Revenues and Unit Sales

Year Ended December 31,20052

% change

20042

% change

2003Revenues (€ in millions)1Western Europe

15,134

+5

14,455

+10

13,169Germany

7,552

+8

7,013

+7

6,531Other

7,582

+2

7,442

+12

6,638NAFTA region

12,770

+22

10,471

+17

8,918United States

10,561

+19

8,888

+17

7,629Canada

1,427

+36

1,049

+25

839Mexico

782

+46

534

+19

450South America

1,932

+32

1,462

+49

981Brazil

1,205

+32

917

+26

725Other

727

+33

545

+113

256Asia (including Australia)

6,794

+32

5,134

+243

1,497Japan

3,963

+48

2,674

+2,974

87Other

2,831

+15

2,460

+75

1,410Other markets

4,004

+24

3,242

+45

2,241World

40,634

+17

34,764

+30

26,806UnitsWestern Europe

277,000

+1

274,400

+10

249,500Germany

110,600

0

110,600

+9

101,700Other

166,400

+2

163,800

+11

147,800NAFTA region

217,800

+23

177,100

+32

134,200United States

182,900

+21

150,700

+32

114,600Canada

20,400

+40

14,600

+45

10,100Mexico

14,400

+22

11,800

+24

9,500South America

61,800

+11

55,800

+43

39,000Brazil

35,100

-3

36,000

+17

30,800Other

26,700

+35

19,800

+141

8,200Asia (including Australia)

181,000

+39

130,100

+343

29,400Japan

60,300

+40

43,000

+2,767

1,500Other

120,700

+39

87,100

+212

27,900Other markets

87,300

+17

74,800

+53

48,900World

824,900

+16

712,200

+42

501,000


---

---

Worldwide unit sales of our Commercial Vehicles segment increased 16% from 712,200 vehicles in 2004 to 824,900 vehicles in 2005. Since
March 31, 2004, we have consolidated the unit sales and revenues of

20

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MFTBC
with a one-month time lag. Accordingly, our total revenues and unit sales for 2004 include 8 months of MFTBC's sales and our total revenues and unit sales for 2005 include
twelve months of MFTBC's sales. Sales in 2005 and 2004 include 178,900 and118,100 units, respectively, sold by MFTBC. If we exclude MFTBC's sales in both periods, unit sales of our Commercial Vehicles
segment increased 9%.

In
Western Europe, the 1% increase of commercial vehicle unit sales is primarily due to higher sales of Mercedes-Benz trucks and vans. In Germany, the most important market
for our Mercedes-Benz and Setra commercial vehicles, we sold 110,600 units in 2005, the same level as in 2004. Unit sales in Germany represented 13% and the remaining Western European
market 20% of our total 2005 commercial vehicle sales.

In
the NAFTA region, sales of our commercial vehicles increased significantly to 217,800 units in 2005. This increase was primarily achieved through higher sales of Freightliner,
Sterling and Western Star trucks (mainly in the Class 8 category). In addition, sales of the Sprinter van in the NAFTA region rose from 18,900 units to 28,100 units. These figures include
Sprinter vans sold under the Dodge brand.

In
South America, sales continued their upward trend with an increase of 11% from 55,800 units in 2004 to 61,800 units in 2005.

In
Japan, our unit sales, which in 2005 consist primarily of sales by MFTBC, reached 60,300, a significant increase over 2004. MFTBC's calendar year 2005 unit sales in Japan went down
compared to calendar year 2004 unit sales, due in part to the negative effect of past quality issues, including a related temporary ban on government sales.

The
following table shows, by vehicle category, the unit sales of our Commercial Vehicles segment since 2003:

Year Ended December 31,20052

20042

2003UnitsVans

267,200

260,700

230,900Trucks

501,300

403,300

232,400Buses

44,200

37,400

28,300Other Products1

12,200

10,800

9,400Total

824,900

712,200

501,000


---

---

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

Competition.In Western Europe, our principal competitors in the van category are Fiat (Fiat, Iveco), Ford, Volkswagen and
Renault. In the United States, competitors include Ford and General Motors (Chevrolet, GMC).

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 International, Paccar (Kenworth, Peterbuilt), Volvo Group (Volvo, Mack, Renault), General Motors and Ford. In Japan and the
South East Asian markets, our main competitors (including buses) are Hino, Isuzu and Nissan Diesel.

21

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Our main competitor in the bus sector (over 8t GVW) is Volvo. In Western Europe, other major competitors are Neoman (MAN, Neoplan), Scania and Irisbus (Irisbus, Heuliez Bus, Karosa). Our
main competitors in South America are Volkswagen and Agrale, but Volvo and Scania are also represented in that region. In Asia, our main competitors are Toyota, Hino and Isuzu.



We distribute our commercial vehicles through a worldwide distribution and service network.

In
Germany, we sell our commercial vehicles through our own wholesale network. We also own several retail outlets, and in some cases we sell our commercial vehicles through independent
dealers.

In
other major European markets, local DaimlerChrysler subsidiaries provide wholesale services to a network of independent dealers and, in some cases, to our own retail outlets.

In
the NAFTA region, we sell our products through a network of mostly independent dealers. In Japan, MFTBC sells its commercial vehicles through its own wholesale network and owns most
of the retail outlets. In other international markets, 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
expect to continue to establish our own retail outlets in major European metropolitan centers in an effort to strengthen our retail activities.



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

Year Ended December 31,2005

2004

2003(€ in millions)Capital expenditures for fixed assets

1,743

1,184

958Research and development

1,281

1,226

946


---

In
2005, our Commercial Vehicles segment had capital expenditures for fixed assets of €1.7 billion. These expenditures primarily related to a future successor
model of the Sprinter, new truck generations and new low-emission engines.

Research
and development projects in the commercial vehicles area focused on new products, mainly trucks and lifecycle management for trucks and for engines which have to meet new
emission standards. In 2005, our expenses for research and development amounted to €1.3 billion.

Financial Services

In 2005, we renamed our Services segment "Financial Services" to reflect its focus on financial services supporting our automotive businesses. In 2005, our
financial services activities contributed approximately 9% of our revenues.

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. In Germany, we operate a fully licensed bank, the DaimlerChrysler Bank. 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

22

---



and
demand deposit accounts. In addition, we offer insurance 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
recent years. In 2003, we sold portions of our capital services portfolio, which consists of non-automotive assets, for proceeds of €0.3 billion and made minor
dispositions in 2004. In 2005, we sold our equity interest in debis AirFinance B.V. (dAF) and our outstanding subordinated loans receivable and unsecured loans provided to dAF for
€325 million in cash. Prior to the sale, we accounted for our investment in dAF using the equity method of accounting.

We
also have an ownership interest in Toll Collect, for which we account using the equity method of accounting. In September 2002, our subsidiary DaimlerChrysler Financial
Services AG (formerly DaimlerChrysler Services AG), Deutsche Telekom AG and Compagnie Financière et Industrielle des Autoroutes S.A. (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 we and Deutsche Telekom each hold a 45% interest and Cofiroute holds the remaining 10%, is the principal builder and operator of the system. You can find additional information about
Toll Collect under the heading "Off-Balance Sheet Arrangements" in "Item 5. Operating and Financial Review and Prospects," under the heading "Legal Proceedings" in "Item 8. Financial
Information" and in Note 3 to our Consolidated Financial Statements.



The revenues of our Financial Services segment amounted to €15.4 billion in 2005, €13.9 billion in 2004 and
€14.0 billion in 2003.

The
following table shows the distribution of revenues derived from our financial services activities by geographic market since 2003:

Year Ended December 31,2005

2004

2003(€ in millions)Western Europe

6,127

5,671

5,460Germany

4,394

4,057

3,759Other

1,733

1,614

1,701NAFTA region

8,609

7,581

7,917United States

7,177

6,412

6,680Canada and Mexico

1,432

1,169

1,237Other markets

703

687

660World

15,439

13,939

14,037


---

In
2005, we generated approximately 56% of our total financial services business in the NAFTA region, 28% in Germany and 11% in other Western European countries. We discuss
period-to-period changes in revenues under the heading "Operating Results" in "Item 5. Operating and Financial Review and Prospects."

In
2005, the Financial Services segment processed new leasing and finance contracts covering approximately 2,094,000 units with a total value of €48.2 billion. In
the prior year, we processed new leasing and finance contracts covering 2,329,000 units with a total value of €50.9 billion. The total value of leasing and finance contracts at
December 31, 2005, was €117.7 billion compared to €102.4 billion at December 31, 2004, a 15% increase in total contract value. Excluding
currency translation effects, our total contract value increased 3% compared to 2004. The average monthly payment for new vehicle installment sale contracts in

23

---



2005
was €469. The average new contract balance amounted to €22,995 and the average original term was 49 months.

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, 2005 (in each case by geographic area and in total):

Units
Covered by
New
Contracts

Value
(€ in millions)

Units
Covered by
all
Contracts

Value
(€ in millions)United States1

1,234,378

26,667

4,034,769

69,557Germany1

327,164

8,123

759,951

15,247Canada1

153,560

3,554

590,591

9,950United Kingdom1

61,659

1,873

134,202

3,191Mexico

71,618

981

170,423

1,928France

46,744

1,012

103,561

1,882Italy

35,058

778

127,786

2,183Japan1

21,814

743

85,329

1,743Australia1

13,945

484

52,541

1,403Netherlands

12,857

370

43,087

910Other Countries1

115,145

3,567

294,681

9,730Total

2,093,942

48,152

6,396,921

117,724


---

---

In the 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.



The table below shows capital expenditures for fixed assets, which related largely to the acquisition of data processing equipment, and additions to equipment
under operating leases during each of the last three years:

Year Ended December 31,2005

2004

2003(€ in millions)Capital expenditures for fixed assets

45

91

76Equipment on operating leases

16,055

13,850

11,631


---

Other Activities

Our Other Activities segment comprises our businesses, operations and investments not allocated to one of our other business segments. The segment includes our
Off-Highway business, our investment in EADS, our real estate and corporate research activities, our holding companies and our finance subsidiaries through which we refinance the capital
needs of our operating businesses in the capital markets. As part of the new management model described above under the heading "Introduction," we intend to change the composition of our business
segments by reporting the van and bus business units with our Other Activities.

24

---



EADS.We account for the minority interest we hold in EADS using the equity method of accounting and we report our share of
the operating results of EADS as part of the operating results of our Other Activities segment. EADS is a global supplier in the aerospace sector and the defense business and also provides related
services. The EADS Group includes the aircraft manufacturer Airbus, the helicopter supplier Eurocopter and the joint venture MBDA, a guided missile producer. In addition, EADS is a partner in the
Eurofighter consortium and a prime contractor for the Ariane launcher. The company is developing the A400M military transport aircraft and is the industrial partner for the European satellite
navigation system Galileo.

Off-Highway.As of January 1, 2004, we allocated our Off-Highway business, which was
previously included in Commercial Vehicles, to our Other Activities segment. We have adjusted 2003 figures to reflect this presentation. Our Off-Highway business includes the MTU
Friedrichshafen Group, the Off-Highway businesses of Detroit Diesel Corporation and of DaimlerChrysler AG as well as our minority investment in VM Motori S.P.A. The Off-Highway
business focuses on engine applications for rail and marine products, military and industrial vehicles as well as stationary industrial and commercial applications (e.g. electric power generators).

In
December 2005, we agreed to sell substantially all of our Off-Highway business (with the exception of our minority holding in VM Motori S.P.A.) to the Swedish
investor group EQT. We expect to consummate the transaction in 2006 and to achieve a net cash inflow of approximately €1.0 billion from the sale.

MMC.Following a corporate restructuring at MMC in 2004, our interest in the voting stock of MMC was diluted from 37.0% to
24.7% and we no longer had the ability to exercise significant influence over the operating and financial policies of MMC. As a result, we ceased to account for our investment in MMC using the equity
method of accounting and classified our investment in MMC as an investment in related companies, accounted for at fair value. Since then, our equity interest was further diluted and, in
November 2005, we sold our remaining 12.4% interest in MMC for €970 million. Please refer to the discussion in Note 4 to our Consolidated Financial Statements for
further information.

MTU Aero Engines.On December 31, 2003, we sold MTU Aero Engines GmbH and its subsidiaries to the investment company
Kohlberg Kravis Roberts & Co. Ltd. (KKR). As required by U.S. GAAP, we reclassified the results of MTU Aero Engines and the gain on the sale of this business as discontinued operations
in our consolidated statements of income and report them accordingly. We have adjusted our consolidated statements of income (loss) for all periods presented to reflect this presentation. For further
information regarding the effects on our operating profit in 2003, please refer to "Operating Results" in "Item 5. Operating and Financial Review and Prospects."

Revenues
from continuing operations of this segment originate mainly from our Off-Highway business unit and our real estate business. The following table shows the revenues
generated by our Other Activities segment since 2003:

|                                                         |                                                            | Year Ended December 31, |       |    
|-------------------------------------------------------- | ---------------------------------------------------------- | ----------------------- | ----- | ---
|
|
|DC Off-Highway                                           |                                                            | 2,064                   |       | +18
|Real Estate and other businesses Germany                 |                                                            | 332                     |       | -26
|                                                         |                                                            |                         |       |    
|                                                         | Total revenues from continuing operations                  |                         | 2,396 |    
|                                                         |                                                            |                         |       |    
|Revenues from discontinued operations (MTU Aero Engines) |                                                            | 0                       |       | 0  
|                                                         |                                                            |                         |       |    
|                                                         | Total revenues from continuing and discontinued operations |                         | 2,396 |    
|                                                         |                                                            |                         |       |    

---

---

25

---



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



The following table sets forth the distribution of revenues from continuing operations of Other Activities by geographic market since 2003:

|               |                   | Year Ended December 31,
|-------------- | ----------------- | -----------------------
|
|
|Western Europe |                   | 1,190                  
|               | Germany           |                        
|               | Other             |                        
|NAFTA region   |                   | 466                    
|               | United States     |                        
|               | Canada and Mexico |                        
|Asia           |                   | 357                    
|Other markets  |                   | 383                    
|               |                   |                        
|               | World             |                        
|               |                   |                        

---

---

SUPPLIES AND RAW MATERIALS

We operate our worldwide procurement and supply activities through a single global procurement and supply function. We aim to maximize 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.

Prices
for certain raw materials remained at high levels in 2005 due to increased demand, speculation, and unforeseen natural disasters. Oil prices continued to increase through the
third quarter and began to moderate
in the fourth quarter, but remained at high levels compared to previous years. Fuel and resin (plastics) prices developed in conjunction with oil prices. Steel prices declined in 2005 but remained at
high levels compared to previous years. The higher raw material prices increased our material costs in 2005.

We
manage our current and future supplies and raw material requirements and delivery needs on an ongoing basis in close cooperation with our suppliers and sub-suppliers. To
avoid potential shortages or substantial price increases we enter into annual and long-term supply agreements with suppliers, and purchase raw materials or commodities on the spot market
as needed.

Prices
of precious metals, including platinum, palladium and rhodium, which we primarily use in catalytic converters, also increased in 2005. We use derivative commodity instruments to
hedge against the volatility of precious metals prices to the extent we deem appropriate. We also continue to research alternative materials and processes for use in catalytic converters and other
components. In addition, we have established a corporate commodity risk management committee to provide enhanced control and oversight over our commodity price exposure.

Consistent
with general industry practice, we may source certain parts or components from a single supplier. This practice carries the risk of potential production disruption if the
supplier is unable to perform its obligations. We have provided, and in the future may be required to provide, different types of assistance to certain suppliers in order to avoid prolonged
interruption in the supply of parts or components. This assistance could negatively impact our profitability.

26

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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 differing standards and substantial testing and certification requirements. The
cost of complying with these varying regulations can be significant, and we expect to incur significant compliance costs in the future. We recognize, however, that leadership in environmental
protection and safety 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. Under certain circumstances, manufacturers
may be 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. The standards are being phased in over
model years 2004 - 2009. Under certain circumstances, the standards 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 no longer permitted 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 after treatment, 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 2004, in connection with the settlement of litigation brought by vehicle manufacturers (including our subsidiary, DaimlerChrysler Corporation) and dealers, CARB adopted 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 took effect beginning with model year 2005.

Other
states may adopt California standards as an alternative to the EPA's Tier 2 program. To date, the states of Connecticut, Massachusetts, Maine, New Jersey, New York, Oregon,
Pennsylvania, Rhode Island, Vermont and Washington have adopted the California standards. Washington and Pennsylvania have not adopted the requirement for zero-emission vehicles. Other
states have also expressed interest in adopting California's zero-emission standards. We expect to continue to incur significant costs in developing 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

27

---



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. In August 2005, we signed an arrangement with General
Motors Corporation regarding a cooperative effort to develop a two-mode full hybrid propulsion system for applications in Chrysler Group, Mercedes Car Group, and GM vehicles that would
improve fuel economy significantly. In December 2005, the BMW Group entered into a binding agreement with GM and us regarding the joint development of hybrid drive systems.

European Standards.Current vehicle emission control standards in the European Union (EU) are
generally no more restrictive than U.S. standards. However, the EU Commission and the EU 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
100,000 kilometers, whichever occurs first. Standards for heavy commercial vehicles have been adopted by the EU Commission and the EU Parliament for model years 2005 (EURO 4) and 2008 and
thereafter (EURO 5).

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. The CAFE standard for passenger cars
is currently 27.5 miles per gallon. The standard for light-duty trucks, including minivans and sport utility vehicles, is 21.0 miles per gallon for model year 2005, 21.6 miles per gallon
for model year 2006, and 22.2 miles per gallon for model year 2007.

The
National Highway Traffic Safety Administration (NHTSA) is currently engaged in rulemaking to issue "Reformed" light-duty truck CAFE standards. The rule that NHTSA has
proposed would divide the truck fleet into several size categories based on the vehicle "footprint," which is based on the vehicle's wheelbase and track width. Each footprint category will have
differing target fuel economy values, with smaller footprint trucks expected to achieve higher fuel economy. Footprint fuel economy targets would range from 20.4 to 26.8 miles per gallon in 2008,
increasing to 21.2 to 28.4 miles per gallon in 2011. The CAFE standard required for the manufacturer will be calculated based on the fuel economy targets in each size category, weighted by the
distribution of production volumes across the size categories.

The
proposal allows voluntary compliance of Reformed CAFE standards for model years 2008 - 2010, with mandatory adoption in 2011 and beyond. Manufacturers that elect to use
Unreformed CAFE (i.e., CAFE calculated under the current rule) must meet a miles per gallon standard of 22.5 in 2008, 23.1 in 2009, and 23.5 in 2010.

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.

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 in certain model years, as production and model changeover schedules can temporarily affect CAFE results. 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
or hybrid vehicles. We may not be able to meet the current and proposed U.S. import fleet CAFE standards for passenger cars, and may incur fines as a result.

The
United States and other countries may adopt more stringent CAFE standards as a way of reducing 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

28

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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.

California
is also attempting to limit such emissions through regulation of fuel economy standards. In July 2002, California passed a law that requires CARB to develop regulations
that would require automakers to reduce significantly greenhouse gas emissions from their vehicles starting with 2009 models. The California Air Resources Board has adopted regulations to implement
this law. Several other states plan to adopt, or already have adopted, similar measures.

The
Alliance of Automobile Manufacturers, of which our subsidiary DaimlerChrysler Corporation is a member, has filed a lawsuit in federal court in Fresno, California challenging these
regulations. Daimler-Chrysler Corporation, General Motors Corporation and several local car dealers have filed a lawsuit challenging these regulations in state court in Fresno, California. Similar
lawsuits are pending in New York, Vermont, and Oregon. 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 diesel, and flexible fuel vehicles capable of operating on both gasoline and ethanol blend
fuels.

European Standards.The European Union (EU) 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 EU 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 EU 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 EU Commission on potential further reductions after 2008. This consultation was requested by the EU
Commission and we, as a member of ACEA, are actively involved in this consultation process. The consultations will continue in 2006. Should the EU 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 incur significant costs to improve engine and overall
efficiency and reduce vehicle weight significantly.

In
addition, in 2003 the EU and the ACEA discussed a voluntary agreement for emission standards for light commercial vehicles not registered as passenger cars. So far no emission
standards for light commercial vehicles have been agreed upon since the EU Commission has agreed to first establish a standardized test cycle for measuring fuel consumption and carbon dioxide emission
for light commercial vehicles in a standardized manner as a basis for future possible emission standards. As a result, the EU 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 EU. 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). There are discussions in
the EU Commission about applying the above mentioned passenger cars rules also to light commercial vehicles, covering classes 1 to 3. Currently, we cannot assess the potential implications on our
business if the passenger car rules were to come into effect also for light commercial vehicles. Nevertheless, the inclusion of light commercial vehicles into the above mentioned passenger car
category would make it even more difficult to achieve the 120 grams per kilometer target.

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

29

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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.

NHTSA's
Interim Final Rule relating to advanced airbag systems imposes a regimen of tests with stringent 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 rule's safety standard. In
January 2003, NHTSA reduced the first-year percentage requirement to 20%, but retained the original percentage requirements for the later model years. These standards add to the
cost and complexity of designing and producing new motor vehicles and original motor vehicle equipment.

The
U.S. Transportation Recall Enhancement, Accountability and Documentation Act, or the TREAD Act, requires, among other things:



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
non-compliance 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 EU or by individual countries. In addition, the ACEA negotiated a voluntary self commitment on pedestrian safety with the EU Commission. The self commitment comprises two phases.
Phase one criteria which, among other things, ban rigid bull bars by original manufacturers, require compliance with specific head injury criteria and mandate of antilock brake systems (ABS), are part
of a framework directive of the EU and, as such, are already legally binding. Phase one criteria are effective beginning in October 2005 and original manufacturers must be in full compliance
with the criteria by 2012. Phase two criteria, which the ACEA and the EU Commission are still discussing, are intended to amplify standards established in phase one. The goal of ACEA in its
discussions with the EU Commission is to convince the Commission to open phase two for more active safety measures, such as the mandatory introduction of electronic stability programs or other
accident avoidance measures, instead of imposing more passive requirements, such as 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. Similar requirements apply to our operations in Europe, Canada and Mexico.

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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.

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, 2005, DaimlerChrysler Corporation may incur
remediation costs at 134 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 11 principal sites. In addition, German manufacturing facilities are subject to enhanced noise restrictions.

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 gross vehicle 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.

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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Design Protection

On September 14, 2004, the EU Commission adopted a proposal for an amendment of the design protection directive Nr. 98/71/EC. The proposed amendment
would abolish the design protection for visible and styled automotive parts within the EU. The proposal would allow parts manufacturers independent from the original equipment manufacturers to copy
and sell throughout the EU visible and styled replacement parts such as hoods, bumpers, fenders, doors, lights and windshields. If this proposed amendment becomes effective, it may negatively affect
our future sales of visible and styled replacement parts and may increase our allocated costs per unit accordingly.

DESCRIPTION OF PROPERTY

At December 31, 2005, we had 105 manufacturing facilities worldwide, of which 22 are located in Germany and 38 in the United States. Most of the remaining
facilities are in Brazil, Canada, France, Japan, Mexico and, South Africa, Spain and Turkey. 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 at December 31, 2005:



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             | 

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Chrysler Group

|United States       |                              | 
|------------------- | ---------------------------- | 
|                    |  Belvidere, Illinois        | 
|                    |  Detroit, Michigan          | 
|                    |  Fenton, Missouri           | 
|                    |  Kenosha, Wisconsin         | 
|                    |  Kokomo, Indiana            | 
|                    |  Newark, Delaware           | 
|                    |  Sterling Heights, Michigan | 
|                    |  Toledo, Ohio               | 
|                    |  Trenton, Michigan          | 
|                    |  Twinsburg, Ohio            | 
|                    |  Warren, Michigan           | 
|Canada              |                              | 
|                    |  Brampton                   | 
|                    |  Toronto                    | 
|                    |  Windsor                    | 
|Mexico              |                              | 
|                    |  Saltillo                   | 
|                    |  Toluca                     | 
|Venezuela           |                              | 
|                    |  Valencia                   | 
|Commercial Vehicles
|Germany             |                              | 
|                    |  Düsseldorf                 | 
|                    |  Gaggenau                   | 
|                    |  Kassel                     | 
|                    |  Ludwigsfelde               | 
|                    |  Mannheim                   | 
|                    |  Ulm                        | 
|                    |  Wörth                      | 
|United States       |                              | 
|                    |  Cleveland, North Carolina  | 
|                    |  Gastonia, North Carolina   | 
|                    |  High Point, North Carolina | 
|                    |  Mt. Holly, North Carolina  | 
|                    |  Portland, Oregon           | 
|                    |  Redford, Michigan          | 
|Argentina           |                              | 
|                    |  Buenos Aires               | 
|Brazil              |                              | 
|                    |  São Bernardo do Campo      | 
|                    |                              | 

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|Canada           |                           | 
|---------------- | ------------------------- | 
|                 |  St. Thomas              | 
|Japan            |                           | 
|                 |  Kawasaki                | 
|Mexico           |                           | 
|                 |  Santiago Tianguistenco  | 
|South Africa     |                           | 
|                 |  Atlantis                | 
|Spain            |                           | 
|                 |  Vitoria                 | 
|Turkey           |                           | 
|                 |  Aksaray                 | 
|                 |  Hosdere                 | 
|Other Activities
|Germany          |                           | 
|                 |  Friedrichshafen         | 
|                 | Other Facilities          | 
|Germany          |                           | 
|                 |  Berlin                  | 
|                 |  Böblingen               | 
|                 |  Sindelfingen            | 
|                 |  Stuttgart-Möhringen     | 
|                 |  Stuttgart-Untertürkheim | 
|                 |  Ulm                     | 
|United States    |                           | 
|                 |  Auburn Hills, Michigan  | 
|Japan            |                           | 
|                 |  Tokyo                   | 

In September 2005, our wholly owned subsidiary DaimlerChrysler Corporation (DCC) closed its foundry operations in Indianapolis, Indiana.
DCC continues to own the facility.

At
year-end 2005, the total amount of indebtedness secured by mortgages and other security interests on our principal facilities was €2.2 billion.
These mortgages and other security interests related primarily to the Potsdamer Platz real estate in Berlin, Germany.

Our
property, plant and equipment includes buildings, technical equipment, and other equipment capitalized under capital lease agreements. For more details please refer to Note 14
to our Consolidated Financial Statements. We believe that our principal manufacturing facilities and other significant properties are in good condition and that they are adequate to meet our needs.

We
are party to various joint ventures, assembly contracts, and other arrangements that allow us to gain access to additional production capacity or utilize our plants more efficiently.
For example, some of our vehicles are assembled at third party facilities in Austria, China and Germany, and we have entered into

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agreements
with MMC and Volkswagen to assemble some of their vehicle models at certain of our plants, while MMC, through one of its subsidiaries, assembles the smart forfour for us. We also
participate in a joint venture with Hyundai Motor Company and MMC that manufactures engines in the United States.

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, selling 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 2005, we made
additional capacity adjustments in response to a variety of business considerations. As market conditions evolve, we may adjust our production capacity accordingly.

Item 4A. Unresolved Staff Comments

Not applicable.

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 materialize, 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.

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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 included in this annual report. 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. During the periods presented in this report, the euro, the reporting currency of our Consolidated Financial Statements, fluctuated against several other world currencies, including the
U.S. dollar. As a result, all of our subsidiaries that report their results in a functional currency other than the euro have been subject to currency translation risk.

Fluctuations
in the exchange rates of the U.S. dollar, the British pound, the Japanese yen, and other world currencies against the euro also expose our international business operations
and, consequently, our reported financial results and cash flows, to transaction risk. This transaction risk exposure affects primarily 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
both 2005 and 2004, the combined currency effects, including effects from currency translation, operating business transactions and hedging activities, significantly negatively
affected our operating results. If the euro remains strong compared to other major world currencies for an extended period of time or if it appreciates further, our profitability and financial
situation in 2006 and beyond could be further negatively impacted, and, with respect to 2006, potentially to a greater degree than in 2005. This is particularly applicable to our Mercedes Car Group
segment. 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 NOT YET ADOPTED

Please refer to Note 1 to our Consolidated Financial Statements for a description of our significant accounting policies and the new accounting
pronouncements that we had not adopted by December 31, 2005.

INFLATION

In Germany, the average consumer price inflation rate in 2005 was 2.0% compared to 1.6% in 2004 and 1.1% in 2003. In the United States, the average consumer price
inflation rates were 3.4% in 2005, 2.7% in 2004 and 2.3% in 2003. 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 in this annual report.

Recovery of Carrying Amount of Equipment on Operating Leases

We own equipment, primarily passenger cars and commercial vehicles, that we lease to customers under operating leases. At December 31, 2005, the total
carrying value of this equipment was €34.2 billion, compared to €26.7 billion at December 31, 2004. In 2005 and 2004, the carrying value of
operating leases that originated with our financial services business represented approximately 89% and 88%, respectively, of the total carrying value of equipment under operating leases in the
respective year.

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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 to reevaluate our estimates frequently and to 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 impairment amount we
recognize is equal to the excess of the carrying value of the equipment over its fair value.

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:



So
long as sales incentives remain an integral part of our sales promotion activities  thereby reducing new vehicle sales prices  or if economic conditions
deteriorate in our primary markets, resale prices of used vehicles and, correspondingly, the residual values of our leased equipment may experience additional downward pressure. If used vehicle resale
prices decline, our future operating results are likely to be adversely affected by impairment charges or by increases in depreciation expense resulting from reductions in our residual value
estimates.

Aside
from the risk of collecting the monthly lease payments (credit risk), which primarily resides within our Financial Services segment, the residual value risk associated with our
operating leases is primarily shared by our Financial Services segment and the vehicle segment that manufactured the leased equipment (i.e., Chrysler Group, Mercedes Car Group or Commercial Vehicles).
The terms of the risk sharing arrangement between Financial Services and the respective vehicle segment vary by segment and geographic region.

We
record any pre-tax expense arising from changes in estimates of residual values in the line item "Cost of sales" in our statement of income. The recognition of impairment
charges and increases in depreciation expense do not immediately affect our reported cash flows, although cash flows of future periods may be lower than previously anticipated due to lower proceeds
from the eventual resale of the equipment.

The
rate of recovery of the carrying value of our investments in equipment on operating leases depends on the timing and amount of operating lease payments we collect from our customers
and the proceeds we derive from the sale of the vehicle when the lease matures. To the extent the value of used vehicles decreases, we will realize less cash proceeds from sales of those vehicles at
the end of the lease term. In addition, inability of our customers to make their monthly lease payments could also adversely affect our liquidity and capital resources.

In
addition, the Chrysler Group, the Mercedes Car Group and the Commercial Vehicles segment account for sales of vehicles with a guaranteed minimum resale value, such as sales to certain
rental car company customers, like an operating lease, based on the guidance in Emerging Issues Task Force (EITF) 95-1, "Revenue Recognition on Sales with a Guaranteed Minimum Resale
Value." These types of vehicle sales expose us to residual value risk and require that we estimate on an ongoing basis what the residual values of the vehicles will be at contract maturity and, if
necessary, record impairment charges or increase future depreciation expenses.

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Collectibility of Financial Services 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, 2005 and 2004, our financial services business held all of our sales financing and finance lease
receivables. We are exposed to collectibility risk because consumers or dealers may default on these receivables or become insolvent and the resale prices of the cars and commercial vehicles securing
these receivables may be insufficient, after selling costs, to realize the full carrying values of the receivables. Once the collectibility risk materializes, it affects 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 which represents our best estimate of the amount of losses incurred in our sales finance and finance
lease receivables portfolio as of the balance sheet date. 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 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:



Since
the risk associated with the collectibility of sales financing and finance lease receivables is almost exclusively attributable to our Financial 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 the following average credit loss rates for our
entire financing and leasing portfolio at December 31, 2005: 0.4% for Mercedes Car Group, 0.8% for Chrysler Group and 0.5% for Commercial Vehicles. However, additional provisions may be
necessary if:



Weakness
in the global economy, but especially 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 Financial
Services segment's sales financing and finance lease receivables may experience further downward pressure. If these factors require a significant increase in the allowance for credit losses, it could
negatively affect our Financial Services segment's and the Group's future operating results.

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At
December 31, 2005 and 2004, our Financial Services segment's sales financing and finance lease receivables totaled €61.1 billion and
€56.8 billion, respectively. The allowance for credit losses associated with those receivables amounted to €1.2 billion at December 31, 2005, and
€1.1 billion at December 31, 2004. Included within cost of sales were net charges of €0.6 billion in 2005, €0.5 billion in
2004 and €0.6 billion in 2003 to increase the allowance for credit losses.

The
recognition of provisions for credit losses has no immediate impact on our reported cash flows. The recoverability of our sales finance receivables and finance lease receivables
depends predominantly on collections of installment payments over the respective contract terms. Our liquidity and capital resources could be adversely affected if the default rate with respect to
monthly installment payments by our customers 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 we determine that the situation is other-than-temporary. Any such impairment charge reduces the net
carrying value of the balance sheet line item "Other assets" and results in a corresponding charge to the statement of income line item "Revenues."

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



Since
the risk associated with retained interests in sold receivables is primarily attributable to our Financial 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 0.9% at December 31, 2005. However, an additional impairment charge may be necessary if:



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.

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At
December 31, 2005 and 2004, the carrying value of our retained interests of our Financial Services segment was €2.1 billion and
€2.1 billion, respectively. The unrealized gains associated with those retained interests amounted to €0.1 billion at December 31, 2005, and
€0.2 billion at December 31, 2004.

The
recognition of impairment charges to reduce the carrying value of our retained interests does not immediately impact our reported cash flows. The realization of our retained
interests, however, 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 distributable excess cash flows are lower than our estimates, our
liquidity and capital resources could be adversely affected.

Sales Incentives

Sales incentives are an integral part of our vehicle business, especially with respect to the automobile business conducted by the Chrysler Group. Sales
incentives are used to adjust our vehicle 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. Sales incentives used by the Mercedes Car Group and Commercial Vehicles segments
include, among others, lease subsidies and other favorable programs. Other than the judgment required to estimate residual value of leased or sold vehicles, which is in part discussed above, sales
incentives used by those segments do not require significant estimation or judgment by management. In contrast, the Chrysler Group may offer a variety of sales incentive programs at any time,
including: cash offers to dealers and consumers, lease subsidies which reduce the consumer's monthly lease payment, reduced financing rate programs offered to customers through automotive financing
partners and other similar programs. Sales incentives offered by the Chrysler Group involve significant estimation and judgment by management. Therefore, the following discussion refers solely to the
sales incentives used by Chrysler Group.

Upon
the sale to the dealer, the Chrysler Group records as a reduction to revenue and as an accrued liability the estimated impact of sales incentives 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 as to 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 customers will select from available alternatives and the value of programs that will be in effect when a vehicle is purchased
by a customer. The actual cost to the Chrysler Group of the sales incentives programs may be different from the amount accrued. We adjust the accrued liability for sales incentives to actual cost 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
it is recorded.

The
recognition of accruals for sales incentives does not initially affect reported cash flows. Instead, our 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 provide warranties on our products which cover a variety of manufacturing and other defects. 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

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product
warranties are generally consistent with commercial practices within the automotive industry. 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, 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, 2005 and 2004, our total accrued liabilities for product warranties were €11.6 billion and
€10.9 billion, respectively. This increase is primarily attributable to currency translation effects due to the appreciation of the U.S. dollar and to the quality enhancing
measures at our Mercedes Car Group segment. Please refer to Note 25b to our Consolidated Financial Statements for additional information about our provisions for product warranties.

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. Sometimes we have to make cost estimates associated with
the development of new technical solutions which might require regulatory certification prior to the implementation of the service actions or recall campaigns. 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 provide post-retirement health and life insurance benefits to employees primarily in the U.S. and Canada. Most of our pension and post-retirement benefit plans
are defined benefit plans that provide participants with benefits based on various factors including their age, years of service, and compensation level. In contrast, our defined contribution pension
plans specify the nature and amount of contributions we will make to the plans, not the amount of benefits that will be paid to participants.

We
make contributions (cash and/or in-kind) to our pension and post-retirement benefit plans from time to time to satisfy minimum funding requirements under
various laws or otherwise to be able to pay our obligations with respect to such benefits as they come due. These contributions are invested by the plans as described below. We actuarially determine
our pension and other post-retirement benefit expense and obligations using the projected unit credit method, and the amounts calculated depend on a variety of assumptions which vary
according to the economic conditions in the country in which the pension plans are situated.

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At December 31, 2005, our projected pension benefit obligations exceeded plan assets on the Group level, which represents the "underfunded status" of our
plans, by €4.6 billion for all German plans and €2.6 billion for all non-German plans. For the year ended December 31, 2005, our total
pension benefit expense was €0.4 billion for all German plans and €0.7 billion for all non-German plans. We estimate that our total pension
benefit expense will increase by €0.2 billion in 2006.

We
determine our pension expenses at the beginning of the calendar year based on various assumptions and inputs to actuarial models that measure pension benefit expense and plan assets
and liabilities. Actual results usually differ from our assumptions due to changing economic and other factors, which result in unrecognized net actuarial gains and losses. We recognize as a component
of our pension expense the unrecognized gain or loss if, as of the beginning of the year, that amount exceeds 10% of the greater of (1) the projected benefit obligation or (2) the fair
value at year-end of German plan assets and the market-related value at year-end of the significant non-German plan assets. The amount of unrecognized net actuarial
gain or loss recognized is the excess amount divided by the average remaining service period of current plan participants (16 years for German plans and 13 years for U.S. plans). Prior
service cost are amortized on a straight-line basis over the average remaining service period of current participants to whom such costs relate.

As
of December 31, 2005, €13.3 billion of net actuarial losses and €2.5 billion of prior service cost had not yet been recognized in
our statements of income. In the future, we expect these unrecognized amounts will decrease due to increases in the discount rates used to measure benefit obligations resulting from an expected
increase in interest rates in the countries where our pension plans are situated.

The
two most critical assumptions impacting the calculations of pension benefit expense and pension benefit obligations are the discount rates and expected rate of return on plan assets.
We evaluate these critical assumptions at least annually on a plan and country-specific basis. Other assumptions, such as retirement age, mortality rates, employee turnover rates, and compensation
rates, are evaluated periodically and updated to reflect actual historical experience and future expectations.



The discount rate enables us to state expected future cash flows at present value on the measurement date (principally December 31). A lower discount rate
increases the present value of benefit obligations and increases pension expense. We determine the discount rates for our German and non-German plans annually as of December 31,
based on yields of high-quality (AA-rated or
better) fixed income investments for which the timing and amounts of payments match the timing and amounts of our projected pension payments.

To
reflect market interest rate conditions and declining yields on corporate debt, we reduced the discount rate for all significant German pension plans from 4.8% as of
December 31, 2004, to 4.0% as of December 31, 2005, and for all significant non-German plans from 5.8% as of December 31, 2004, to 5.4% as of December 31, 2005.
As a result of these declines in discount rates, our German and non-German pension benefit obligations increased during 2005 by €1.6 billion and
€0.9 billion, respectively.



Pension plan assets are primarily comprised of equity and debt securities and, to a lesser extent, real estate and alternative investments. We determine the
expected rate of return for pension assets after taking into consideration a variety of factors including current and planned future asset allocations and expected future returns for the various asset
classes. Each year, our investment committees survey banks and large asset portfolio managers about their expectations of future returns for the relevant market indices.

Based
on projected asset returns and historical correlations and volatilities, we develop a target asset mix for our pension plans using "Modern Portfolio Theory". The allocation of
weighted average return expectation serves as an initial indicator of the expected rate of return on plan assets for each of the pension funds.

42

---



In
addition, we also consider long-term actual portfolio results and historical total market returns in our evaluation in order to reflect the long-term character
of the expected rate.

The
actual and expected rates of return on German and non-German plan assets for 2005, 2004, and 2003 were as follows:

Rates of ReturnGerman Plans

Rates of ReturnNon-German PlansActual

Expected

Actual

Expected2005

16.9
%
7.5
%
12.1
%
8.5
%2004

8.2
%
7.5
%
13.7
%
8.5
%2003

14.6
%
7.5
%
23.0
%
8.5
%


For
2006, the expected rates of return on plan assets are the same as the rates applied in 2005.



The following table shows the effect on the funded status of our pension benefit obligations of assumed changes in the actual rate of return on plan assets and
the discount rate at December 31, 2005:

German Plans

Non-German Plans(€ in millions)2005 actual return on plan assets +/- 5 percentage points

+/- 450

+/- 1,0302005 discount rate +/- 25 basis points

+/- 610

+/-    725


At December 31, 2005, pension benefit obligations decreased our stockholders' equity by €0.5 billion for all German
plans and increased stockholders' equity by €0.4 billion for all non-German plans. The following table shows the after-tax effect on our stockholders'
equity of assumed changes in the rate of actual return on plan assets and the discount rate at December 31, 2005:

German Plans

Non-German Plans(€ in millions)2005 actual return on plan assets +/- 5 percentage points

+/- 275

+/- 6452005 discount rate +/- 25 basis points

+/- 340

+/- 440


In addition to the estimated increase in our total pension benefit expense of €0.2 billion in 2006, the following table
shows the effect on our 2006 pension benefit expense (before income tax benefits) of assumed changes in the discount rate and the expected long-term rate of return on plan assets:

German Plans

Non-German Plans(€ in millions)2005 discount rate +/- 25 basis points

+/- 45

+/- 502005 expected long-term rate of return on plan assets +/- 50 basis points

+/- 50

+/- 100




At December 31, 2005, our accumulated other post-retirement benefit obligations exceeded plan assets on the Group level, which represents the
"underfunded status" of our plans, by €15.8 billion for all plans. For the year ended December 31, 2005, our total expense was €1.3 billion for all
plans. We estimate that our total expense will increase by €0.1 billion in 2006.

The
two most significant assumptions requiring considerable judgment are the weighted average discount rate to determine benefit obligations and the future health care inflation rate. In
accordance with U.S. GAAP, we determine our post-retirement benefit expenses at the beginning of the calendar year, and we accumulate and amortize over future periods actual results that
differ from the assumptions used. Therefore, actual results

43

---



generally
affect our recognized expense and recorded liabilities for post-retirement benefit obligations in future periods.



The estimation process for discount rates and expected rate of return on plan assets is similar to the estimation to determine pension benefit obligations
described above.



The health care inflation rate represents the anticipated increase in health care cost due to changes in price, availability and usage of medical services. This
rate is determined based on DaimlerChrysler-specific experience, consultation with actuaries and outside consultants, and various trend factors including general and health care sector-specific
inflation projections from the United States Department of Health and Human Services Health Care Financing Administration. We did not adjust the health care inflation rate as a result of the Medicare
Drug Act. At December 31, 2005, our accumulated post-retirement benefit obligations exceeded plan assets on the Group level by €15.8 billion. Had the
following actual return occurred or assumptions been used, the funded status of our other post-retirement benefit obligations at December 31, 2005 would have been impacted
accordingly:

All Plans(€ in millions)2005 actual return on plan assets +/- 5 percentage points

+/-      902005 discount rate +/- 25 basis points

+/-    565Initial through assumed ultimate health care inflation rate +/- 1 percentage point

+/- 1,950


Effects from changes in these assumptions would be included in our unrecognized net actuarial losses at December 31, 2005.

Actual
results that are different from those assumed and changes in assumptions can result in actuarial gains and losses that we have not yet recognized in our Consolidated Financial
Statements. We amortize any unrecognized net actuarial 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 current plan participants expected to receive benefits under the plan. For 2006, 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 actuarial losses from actual experience different from assumptions used we
estimate that our total other post-retirement benefit expense will increase by €0.1 billion in 2006, based on the assumptions used and our plan assets at
December 31, 2005.

In
addition to the estimated increase in our total other post-retirement expense of €0.1 billion in 2006, the following table shows the effect on our
2006 total other post-retirement benefit expense (before income tax benefits) of assumed changes in the discount rate, assumed health care inflation rates and the expected
long-term return rate of return on plan assets:

All Plans(€ in millions)2005 discount rate +/- 25 basis points

+/-   45Initial through assumed ultimate health care inflation rate +/- 1 percentage point

+/- 3002005 expected long-term return rate on plan assets +/- 50 basis points

+/-   10


44

---



For a discussion about our pension and other post-retirement benefit plan funding obligations and their 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 have five business segments: (1) Mercedes Car Group; (2) Chrysler Group; (3) Commercial Vehicles; (4) Financial Services; and
(5) Other Activities. In 2005, we changed the name of our Services segment to "Financial Services" to reflect its focus on automotive financial services.

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 segments, adjusted for consolidation and elimination entries. Please refer to Note 35 to our Consolidated Financial Statements for information about how we determine
segment operating profit (loss).

Reconciliation from operating profit (loss) to income (loss) before financial income

In the following tables, we provide a reconciliation of the operating profits and losses of our segments to the measures we use in our consolidated statements of
income. Since some income and expense items (e.g., interest income and interest expense) are not recorded at or allocated to our segments, we have reconciled the operating profits (losses) to income
(loss) before financial income for each segment. You can find a reconciliation of total segment operating profit (loss) to our consolidated income before income taxes, minority interests, discontinued
operations, extraordinary items, and the cumulative effect of changes in accounting principles in Note 35 to our Consolidated Financial Statements.

Year Ended December 31, 2005
(€ in millions)Mercedes
Car Group

Chrysler
Group

Commercial
Vehicles

Financial
Services

Other
Activities

Total
Segments

Eliminations

GroupOperating Profit (Loss)

(505
)
1,534

2,093

1,468

591

5,181

4

5,185Pension and post-retirement benefit income (expenses), other than current and prior service costs and settlement/ curtailment losses

(33
)
(1,030
)
(55
)
(6
)
(51
)
(1,175
)
0

(1,175
)Operating (profit) loss from affiliated and associated companies and financial (income) loss from related operating companies

(14
)
(1
)
(47
)
38

(706
)
(730
)
90

(640
)Operating (profit) loss from discontinued operations

0

0

0

0

0

0

0

0Pre-tax gains from the sale of operating businesses and discontinued operations

0

0

0

0

0

0

0

0Miscellaneous items

0

0

(42
)
(5
)
(102
)
(149
)
0

(149
)Income (loss) before financial income

(552
)
503

1,949

1,495

(268
)
3,127

94

3,221


---

45

---





Year Ended December 31, 2004
(€ in millions)Mercedes
Car Group

Chrysler
Group

Commercial
Vehicles

Financial
Services

Other
Activities

Total
Segments

Eliminations

GroupOperating Profit (Loss)

1,666

1,427

1,332

1,250

456

6,131

(377
)
5,754Pension and post-retirement benefit income (expenses), other than current and prior service costs and settlement/curtailment losses

(34
)
(697
)
(55
)
(5
)
(54
)
(845
)
0

(845
)Operating (profit) loss from affiliated and associated companies and financial (income) loss from related operating companies

2

9

(9
)
549

(539
)
12

75

87Operating (profit) loss from discontinued operations

0

0

0

0

0

0

0

0Pre-tax gains from the sale of operating businesses and discontinued operations

0

0

0

0

0

0

0

0Miscellaneous items

0

(5
)
(364
)
(4
)
(11
)
(384
)
0

(384
)Income (loss) before financial income

1,634

734

904

1,790

(148
)
4,914

(302
)
4,612


---

Year Ended December 31, 2003
(€ in millions)Mercedes
Car Group

Chrysler
Group

Commercial
Vehicles

Financial
Services

Other Activities

Total
Segments

Eliminations

GroupOperating Profit (Loss)

3,126

(506
)
811

1,240

1,329

6,000

(314
)
5,686Pension and post-retirement benefit income (expenses), other than current and prior service costs and settlement/curtailment losses

(136
)
(561
)
(114
)
(5
)
(54
)
(870
)
0

(870
)Operating (profit) loss from affiliated and associated companies and financial (income) loss from related operating companies

(116
)
60

(103
)
325

(329
)
(163
)
158

(5
)Operating (profit) loss from discontinued operations

0

0

0

0

(84
)
(84
)
0

(84
)Pre-tax gains from the sale of operating businesses and discontinued operations

0

0

0

0

(1,031
)
(1,031
)
0

(1,031
)Miscellaneous items

0

(32
)
(9
)
(17
)
(250
)
(308
)
0

(308
)Income (loss) before financial income

2,874

(1,039
)
585

1,543

(419
)
3,544

(156
)
3,388


---

"Pension and post-retirement benefit income (expenses), other than current and prior service costs and settlement/curtailment losses"
is the sum of the interest cost, the expected return on plan assets, and the amortization of unrecognized net actuarial gains or losses. We exclude from operating profit (loss) 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.

"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. We allocate these contributions to the operating profit (loss) of the respective
segments. In 2005, we allocated net positive results of €640 million from our operating investments to our segments, compared to net negative results of
€87 million in 2004 and net positive results of €5 million in 2003. The increase in 2005 was primarily the result of the improved proportionate share of
the earnings of EADS and smaller losses from our equity investment in Toll Collect. Also, the 2004 reconciling item included impairment charges relating to our investment in debis AirFinance. The
decrease in 2004 compared with 2003 was primarily due to a substantial negative contribution

46

---



to
earnings from our equity investment in Toll Collect, which was only partially offset by significantly improved contributions from our equity investment in EADS.

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

"Pre-tax
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 under "Financial income (loss), net." In 2003, we also
allocated the pre-tax gain of €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. In 2004, this line item is almost entirely comprised of third party minority interests in
the expenses associated with the quality measures and recall campaigns at Mitsubishi Fuso Truck and Bus Company (MFTBC). The minority interest in those expenses is not part of operating profit since
they were incurred as a result of quality problems that originated before we invested in MFTBC. In 2003, this item was almost solely comprised of a charge of $300 million (approximately
€240 million adjusted for currency translation effects), which arose from the settlement of a consolidated class action case relating to the merger of Daimler-Benz
and Chrysler.

Overview of Business Segment Revenues and Operating Profit (Loss)

You should read the following discussion in conjunction with Notes 1 and 35 to our Consolidated Financial Statements and the discussions under the headings
"Critical Accounting Policies" in this 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 33 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.

Year Ended December 31,2005

2004

2003(€ in millions)Revenues

Operating
Profit (Loss)

Revenues

Operating
Profit (Loss)

Revenues1

Operating
Profit (Loss)1Mercedes Car Group

50,015

(505
)
49,630

1,666

51,446

3,126Chrysler Group

50,118

1,534

49,498

1,427

49,321

(506
)Commercial Vehicles2, 3

40,634

2,093

34,764

1,332

26,806

811Financial Services

15,439

1,468

13,939

1,250

14,037

1,240Other Activities3

2,396

591

2,200

456

4,084

1,329Eliminations

(8,826
)
4

(7,972
)
(377
)
(9,257
)
(314
)Total

149,776

5,185

142,059

5,754

136,437

5,686


---

---

47

---



Acquisitions, dispositions and other changes in segment composition

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



Off-Highway.Effective January 1, 2004, we allocated the Off-Highway activities of our Commercial Vehicles
segment to the Other Activities segment, and we have adjusted amounts for 2003 accordingly.

MFTBC.On March 18, 2004, we acquired an additional 22% interest in Mitsubishi Fuso Truck and Bus Corporation (MFTBC) from
Mitsubishi Motors Corporation (MMC). Since March 31, 2004, we have included the revenues and consolidated results of MFTBC with a one-month time lag in our Commercial Vehicles
segment. Prior to March 31, 2004, we accounted for our proportionate share in MFTBC's results in the Commercial Vehicles segment using the equity method of accounting. Subsequent to the
acquisition of the controlling interest in MFTBC in 2004, we discovered quality issues that originated before we invested in MFTBC. (See Note 4 and Note 25b to our Consolidated Financial
Statements for additional information). The subsequently initiated quality measures and recall campaigns at MFTBC reduced 2004 operating profit of the Commercial Vehicle segment by
€0.5 billion. In 2005, a settlement agreement reached with MMC regarding these quality issues and recall campaigns at MFTBC resulted in a favorable impact of
€0.3 billion, which is included in the operating profit of the Commercial Vehicles segment.

HMC.In May 2004, as part of the realignment of our strategic alliance with Hyundai Motor Company (HMC), we sold our
non-controlling 50% interest in DaimlerHyundai Truck Corporation to HMC for a total pre-tax gain of €0.1 billion.

American LaFrance.In 2005, we sold the fire truck and rescue vehicles business of our U.S. subsidiary American LaFrance, to a U.S.
investment company. As a result of the sale, Freightliner recorded asset impairment charges of €0.1 billion in 2005 which negatively affected the operating profit of the
Commercial Vehicles segment.



debis AirFinance.In 2005, we sold our equity interest in debis AirFinance B.V. (dAF) and our outstanding subordinated loans receivable
and unsecured loans provided to dAF for a purchase price of €0.3 billion in cash. Prior to the sale, we accounted for the investment in dAF using the equity method of
accounting. In 2004, we recognized a €0.2 billion impairment charge on the investment. The sale did not have a material impact on 2005 operating profit or net income.



Off-Highway.Effective January 1, 2004, we allocated the Off-Highway activities of our Commercial Vehicles
segment to the Other Activities segment. We have adjusted amounts for 2003 accordingly. In December 2005, we agreed to sell substantially all of our Off-Highway business (with the
exception of our minority holding in VM Motori S.P.A.) to the Swedish investor group EQT. We expect to consummate the transaction in 2006 and expect to have a net cash inflow of
€1.0 billion from the sale. Revenues and operating results of the Other Activities segment include the operations of our Off-Highway business for all periods
presented.

MMC.Following a corporate restructuring at MMC, on June 29, 2004, we ceased to account for our investment in MMC using the equity
method of accounting. Therefore, our Other Activities segment includes our share of MMC's operating results only for the periods up to June 29, 2004. In November 2005, we sold our
remaining 12.4% interest in Mitsubishi Motors Corporation for proceeds of €1.0 billion. The sale resulted in an after-tax gain of
€0.5 billion (a pre-tax gain of €0.7 billion minus taxes of €0.2 billion).

48

---



MTU Aero Engines.On December 31, 2003, we sold MTU Aero Engines GmbH (MTU) and its subsidiaries to the investment company Kohlberg
Kravis Roberts & Co. Ltd. As required by U.S. GAAP, we reclassified the results of MTU and the gain on the sale of this business as discontinued operations in our 2003 consolidated
statement of income and we report them accordingly. As a result of the transaction, we recorded a gain of €1.0 billion which is included in the 2003 operating profit of our
Other Activities segment.

The
segment discussions on pages 51 to 55 describe in more detail the specific market factors which affected the operating results of our segments.

2005 Compared With 2004

We computed the percentages in the following discussion using exact euro amounts and numbers. Some of those percentages may, therefore, not reflect the ratio
between the rounded amounts presented below.

DaimlerChrysler Group



Our revenues increased 5% from €142.1 billion in 2004 to €149.8 billion in 2005. Following is a brief overview of
year-to-year changes in revenues of our primary business segments.

Mercedes Car Grouprevenues increased 1% from €49.6 billion in 2004 to €50.0 billion in
2005. Revenue increases resulting from higher unit sales of Mercedes-Benz vehicles were largely offset by a shift in the product mix to lower priced vehicles and a decrease in unit sales
of smart.

Chrysler Grouprevenues also increased 1% from €49.5 billion in 2004 to €50.1 billion in
2005, primarily as a result of increased worldwide factory unit sales. Measured in U.S. dollars, the principal functional currency for the Chrysler Group, revenues were also 1% higher than in 2004.

Commercial Vehiclesrevenues increased significantly from €34.8 billion in 2004 to
€40.6 billion in 2005, a 17% improvement. As a result of the consolidation of MFTBC as of March 31, 2004, with a one-month time lag, revenues for 2004 include eight
months of MFTBC's revenues while 2005 revenues include twelve months of MFTBC revenues. Excluding MFTBC revenues in both years, revenues of our Commercial Vehicles segment increased 13%, mainly a
result of higher unit sales.

Financial Servicesrevenues increased 11% from €13.9 billion in 2004 to €15.4 billion in
2005, primarily because of a higher total portfolio value of leasing and financing contracts and the fact that operating lease contracts comprised a larger percentage of the total portfolio.



In 2005, cost of sales were €122.9 billion compared to €114.6 billion in 2004, a 7% increase. The increase in cost
of sales was largely proportionate to the increase in revenues. In addition, gross margin decreased from 19.4% in 2004 to 17.9% in 2005, mainly a result of expenses incurred in connection with the
realignment of the smart business model (€0.8 billion) and the headcount reduction program at Mercedes Car Group (€0.5 billion).



Selling expenses were €12.0 billion in 2005 compared to €11.4 billion in 2004, a 5% increase. The increase in
selling expenses primarily reflects changes in the scope of consolidation (primarily the fact that MFTBC was included in our consolidated results for only eight months during 2004 and for twelve
months in 2005) and additional expenses relating to both the realignment of the smart business model (€0.1 billion) and the headcount reduction program at Mercedes Car Group
(€0.1 billion). Selling expenses as a percentage of revenues were 8% in each of 2005 and 2004.

49

---





General administrative expenses reached €6.1 billion in 2005 compared to €6.0 billion in 2004, a 1% increase.
Changes in the scope of consolidation (primarily MFTBC) and increased legal, regulatory and compliance costs were the primary drivers for the increase. General administrative expenses as a percentage
of revenues were 4.1% in 2005, a slight decrease compared to 4.2% in 2004.



Other expenses were €0.9 billion in 2005 and €0.6 billion in 2004. The increase in 2005 was primarily due to
€0.2 billion in expenses related to the realignment of the smart business model.



Research and development expenses amounted to €5.6 billion in 2005 compared to €5.7 billion in 2004.



Other income was €1.0 billion in 2005 and €0.9 billion in 2004.

In
2005, other income included a gain of €0.2 billion from the sale of Chrysler Group's Arizona Proving Grounds vehicle testing facility. The prior year figure
included a gain of €0.1 billion from the settlement of our dispute with Bombardier relating to the sale of DaimlerChrysler Rail Systems (Adtranz). You can find further details
about the composition of other income in Note 6 to our Consolidated Financial Statements.



We present the effects of Chrysler Group's turnaround plan, which we initiated in 2001, as a separate line item in our consolidated statements of income. In 2005,
we recorded a net gain of €36 million. The prior year included net charges of €0.1 billion. You can find further details about the turnaround plan in
Note 7 to our Consolidated Financial Statements.



We recorded net financial income of €0.2 billion in 2005 compared to a net financial loss of €1.1 billion in 2004.
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 2005, income from investments, net, amounted to €0.9 billion, compared to a
net loss of €0.6 billion in 2004. This distinct improvement was primarily due to the following factors in 2005: The sale of our remaining ownership interest in MMC which
resulted in a gain of €0.7 billion; substantially smaller losses at Toll Collect; and improved earnings at our equity investee EADS. In addition, income from investments, net,
in 2004 included losses of €0.6 billion associated with our investment in MMC, partially offset by a gain of €0.3 billion from the disposal of our 10.5%
equity interest in HMC.

Interest income (expense), net.In 2005, we recorded net interest expense of €0.6 billion (2004:
€0.3 billion). The increase primarily reflects unrealized losses from the mark-to-market valuation of derivative financial instruments that did not
qualify for hedge accounting treatment. Please refer to Note 33 to our Consolidated Financial Statements for additional information.

Other financial income (loss), net.Other financial loss, net, improved from a net loss of €0.2 billion in 2004 to
a net loss of €0.1 billion in 2005. In 2005, financial income was impacted by expenses from the mark-to-market valuation of derivative hedging
instruments partially offset by higher gains from the sale of securities. The prior year results included a €0.2 billion impairment of loans provided to debis AirFinance.

50

---





Income tax expense was €0.5 billion in 2005 and €1.2 billion in 2004. We computed income tax expense in 2005 based
on pre-tax income of €3.4 billion and in 2004 based on pre-tax income of €3.5 billion. The effective tax rate was 14.9% in 2005
and 33.3% in 2004. In both years, we recorded profit contributions from EADS, which are largely tax-free, and non-taxable gains included in our net periodic pension costs and
other post-retirement benefit costs.

The
comparatively low effective tax rate in 2005 primarily reflected the composition of our earnings, which included largely tax-free income from the settlement agreement
associated with our investment in MFTBC, the sale of our investment in MMC and the sale of other securities. The tax benefits of these transactions were partially offset by tax expense of
€0.1 billion arising from the repatriation of previously undistributed earnings from non-U.S. companies to our U.S. subsidiaries.

In
2004, the effective tax rate was negatively affected by non-tax deductible losses relating to our investments in MMC and debis AirFinance, offset in part by the
tax-free gain realized on the sale of our 10.5% investment in Hyundai Motor Company.

Please
refer to Note 9 to our Consolidated Financial Statements for more information.



Net income was €2.8 billion in 2005 compared to €2.5 billion in 2004. Basic and diluted earnings per share in 2005
were €2.80 each, compared to €2.43 each in 2004.



In 2005, our Group operating profit was €5.2 billion compared to €5.8 billion in 2004. The table on page 47
shows the business segment contributions to Group operating profit. The segment discussions below describe in more detail the specific factors which affected the operating results of each segment.

Segment Discussions



Revenues of our Mercedes Car Group segment increased 1% from €49.6 billion in 2004 to €50.0 billion in 2005, while
total unit sales decreased 1% from 1,226,800 to 1,216,800.

Unit
sales of Mercedes-Benz vehicles increased 2% from 1,074,600 in 2004 to 1,092,500 in 2005 whereas sales of smart vehicles declined 18% to 124,300 units compared to
152,100 units in 2004. Total segment revenues increased only 1%, primarily as a result of a shift in product mix towards lower priced vehicles.

The
increase in unit sales of Mercedes-Benz passenger cars was mainly driven by the launch of new models during the year. The model changeover to the new M-Class
in 2005 helped increase M-Class unit sales 15%. The all-new B-Class, launched in June 2005, contributed incremental unit sales of 62,200 units and A-Class
unit sales increased 40% to 200,100 units sold. While S-Class sales declined for the year due to the model change in September 2005, the all-new S-Class has
been strong since its introduction. E-Class sales experienced a decline of 10% because of strong competition in its market segment. The decline could not be fully offset by 51,600
additional unit sales contributed by the new CLS model. Unit sales of the C-Class declined to 398,000 units in 2005 as this model line approaches the end of its life cycle and new
competitor models became available in its segment.

The
18% decline in smart unit sales was due to continued weak demand.

In
Germany, Mercedes Car Group unit sales and revenues were each 8% lower than in 2004. Germany continues to be the most important market for our Mercedes Car Group segment with 2005
unit sales of 354,900 units. These sales represented 29% of the segment's worldwide unit sales, which is 2% less compared

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to
the previous year. In the other Western European countries, Mercedes Car Group revenues remained nearly on the same level, while unit sales decreased 3% to 421,700 units. The disproportionate
changes in revenues and unit sales were mainly due to the fact that in 2005 a larger portion of unit sales consisted of higher priced vehicles.

In
the United States, revenues increased 5% from €10.5 billion in 2004 to €11.0 billion in 2005, while unit sales increased 4% to 231,800
units. This increase resulted primarily from the strong sales performance of the successful CLS and the new M-Class. At €2.2 billion, revenues in Japan were 11%
higher than in the previous year compared to a 17% increase in unit sales. These improvements are the result of higher A-Class and CLS sales. In Asia (excluding Japan), revenues went up
19% compared to the previous year, reaching €3.3 billion, while unit sales increased 14% to 59,400 units.

In
2005, our Mercedes Car Group segment recorded an operating loss of €0.5 billion, a decline of €2.2 billion compared to the prior year.
The 2005 operating result includes charges of €1.1 billion for the realignment of the smart business model, which primarily consisted of impairments recognized on production
facilities, estimated claims from suppliers and dealers, sales incentives
and write-downs of vehicle inventories. Net charges of €0.6 billion relating to the headcount reduction program at Mercedes-Benz passenger cars for both voluntary
severance agreements and early retirement arrangements also burdened operating results in 2005. Other factors contributing to the decline in 2005 were less favorable currency hedging rates,
particularly for the U.S. dollar, a shift in product mix towards lower priced vehicles, increased raw material prices and the costs associated with ongoing quality improvement measures. Positive
effects on earnings resulted from the slight increase in unit sales of Mercedes-Benz passenger cars and the efficiency enhancing measures implemented as part of the CORE program. Following
a verdict by the European Court in the case concerning the alleged infringement of EU competition rules, we were also able to release a provision of €0.1 billion with a
corresponding positive effect on earnings.



The Chrysler Group reported revenues of €50.1 billion in 2005 compared with revenues of €49.5 billion in 2004, an
increase of 1.3%. Measured in U.S. dollars, the principal functional currency for the Chrysler Group, revenues were 1.1% higher than in 2004. This increase in revenues is primarily the result of
increased worldwide factory unit sales.

The
Chrysler Group had worldwide factory unit sales of 2,813,000 units in 2005 compared with 2,779,900 units in 2004, an increase of 1%. Worldwide factory unit sales increased primarily
due to the 2005 introduction of the all-new Dodge Charger and Jeep® Commander, as well as the continued popularity of the Chrysler 300/300C, the Town & Country and Dodge
Caravan minivans and the Jeep® Grand Cherokee. These unit increases were partially offset by lower shipments of Dodge Rams, Dakotas and Durangos. In the NAFTA region, total factory unit
sales were 2,637,800 units in 2005 compared with 2,609,700 units in 2004, an increase of 1%. Factory unit sales outside the NAFTA region were 175,200 units in 2005 compared with 170,200 units in 2004,
an increase of 3%.

In
2005, the Chrysler Group had an operating profit of €1.5 billion compared to €1.4 billion in 2004. Positive effects on 2005 operating
profit include an increase in worldwide factory unit sales, a €0.2 billion gain on the sale of the Arizona Proving Grounds vehicle testing facility and a decrease in turnaround
plan charges and charges for workforce reduction actions, as well as lower tooling amortization expense of €0.1 billion. These effects were partially offset by negative net
pricing, shifts in market mix, charges of €0.1 billion related to financial support provided to supplier Collins & Aikman and contractual penalty and asset impairment
charges of €0.1 billion primarily as a result of a decision to reduce contractual purchase volumes of the Chrysler Crossfire.

The
Chrysler Group's 2004 operating profit was negatively impacted by restructuring charges totaling €0.3 billion incurred in connection with the turnaround plan
and other workforce reduction charges and was favorably impacted by an adjustment of €0.1 billion to correct the calculation of an advertising accrual. In

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2005,
income of €36 million was recorded as a result of adjustments to prior estimates associated with the turnaround plan. For a discussion of the Chrysler Group's turnaround
plan, see Note 7 to the Consolidated Financial Statements.

U.S.
dealer inventory levels were 598,200 units, representing an 85 day supply, at December 31, 2005 compared to 600,600 units, representing an 81 day supply, at
December 31, 2004. The U.S. and combined U.S. and Canada retail and fleet sales and market share data for the Chrysler Group in 2005 and 2004 are set forth below:

Year Ended December 31,2005

2004

Increase/
(Decrease)U.S. Retail Market1Car sales

526,800

474,100

52,700Car market share

7.1%

6.5%

0.6%Truck sales (including minivans)

1,782,000

1,737,000

45,000Truck market share

17.8%

17.4%

0.4%Combined car and truck sales

2,308,800

2,211,100

97,700Combined car and truck market share

13.2%

12.8%

0.4%U.S. and Canada Retail Market1Combined car and truck sales

2,525,700

2,421,900

103,800Combined car and truck market share

13.2%

12.8%

0.4%


---

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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 19.1 million units in 2005, compared with 18.9 million units in 2004, an increase of 1%.

Retail
and fleet sales of cars for the Chrysler Group in the U.S. market for 2005 increased 11% compared to 2004 while the total car market in the U.S. increased by 2% compared to 2004.
Retail and fleet sales of trucks for the Chrysler Group in the U.S. market for 2005 increased 3% compared to 2004 while the total truck market in the U.S. remained relatively flat compared to 2004.
The increase in retail and fleet sales and the related market share is primarily a result of the introduction of new products in 2005, as well as the continued popularity of the Chrysler 300/300C, the
Town & Country and PT Cruiser, and Jeep® Grand Cherokee. These increases were partially offset by reduced retail and fleet sales of Dodge Rams and Durangos.



Our Commercial Vehicles segment increased revenues significantly from €34.8 billion in 2004 to €40.6 billion in
2005, a 17% improvement. This was the result of continued strong demand in our core markets Western Europe, NAFTA and South America and the consolidation of MFTBC. Worldwide unit sales of our
Commercial Vehicles segment increased 16% from 712,200 vehicles in 2004 to 824,900 units in 2005 which in part may be attributable to accelerated purchases in advance of changes in emission control
regulations. As a result of the consolidation of unit sales and revenues of MFTBC as of March 31, 2004 with a one-month time lag, revenues and unit sales in 2004 include eight
months of MFTBC sales, while 2005 revenues and unit sales include twelve months of MFTBC sales. Excluding MFTBC sales of 178,900 units (2004: 118,100 units) and MFTBC revenues of
€5.5 billion (2004: €3.7 billion), 2005 unit sales and revenues increased 9% and 13%, respectively.

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Total
truck unit sales increased 24% from 403,300 units to 501,300 units and bus unit sales rose 18% from 37,400 units to 44,200 units in part due to the consolidation of MFTBC and in
part due to overall strong market demand. Sales of vans were 2% higher with 267,200 units in 2005 compared to 260,700 units in 2004.

In
Germany, the most important market for our Mercedes-Benz and Setra commercial vehicles, revenues increased 8% from €7.0 billion in 2004 to
€7.6 billion in 2005, while unit sales remained stable at 110,600 vehicles. This increase resulted from a 23% improvement in truck unit sales, partially offset by a 5% decrease
in van unit sales and a modest decline in bus unit sales. In the rest of Western Europe (excluding Germany), revenues increased 2% to €7.6 billion in 2005 as overall unit sales
increased 2% to 166,400 units, primarily due to higher sales of Mercedes-Benz trucks. Unit sales in Germany represented 13% and the remaining Western European market 20% of our total 2005
commercial vehicle sales.

In
the NAFTA region, revenues were €12.8 billion, an increase of 22% compared to 2004. Total unit sales climbed 23% to 217,800 units. The significant increase in
unit sales was primarily the result of markedly higher sales of Class 8 trucks.

Our
sales in Asia (including Australia) rose from 130,100 units in 2004 to 181,000 units in 2005 and revenues in that region increased from €5.1 billion in 2004 to
€6.8 billion in 2005. This was largely due to the inclusion of twelve months of MFTBC sales in 2005 compared to only eight months in 2004, even though MFTBC's calendar year 2005
sales were lower than its calendar year 2004 sales due to the negative impact of past quality issues.

As
economic conditions improved in Argentina and Venezuela and conditions in Brazil remained comparable to 2004, we were able to increase sales in South America by 11% from 55,800 units
in 2004 to 61,800 units in 2005. Revenues in that region improved 32% to €1.9 billion in 2005.

In
2005, our Commercial Vehicles segment reported an operating profit of €2.1 billion compared to an operating profit of €1.3 billion in
2004, a 57% improvement. This is primarily the result of higher unit sales resulting from favorable market conditions and high demand for our broad range of products, a
€0.3 billion gain from the settlement reached with MMC regarding the cost of quality improvement actions and recall campaigns at MFTBC, and efficiency improvements. These
positive effects were partially offset by the negative impact of higher raw material prices, less favorable hedging rates and currency translation effects, expenses for new product projects and an
impairment charge of €0.1 billion recognized in 2005 relating to the sale of the fire truck and rescue vehicle business of our U.S. subsidiary American LaFrance. Operating
profit in 2004 was negatively affected by charges of €0.5 billion arising at MFTBC relating to quality improvement actions and recall campaigns, while a gain resulting from the
discontinuation of the engine joint venture with Hyundai Motor Company contributed €0.1 billion to the segment's operating profit in 2004.



Revenues of our Financial Services segment increased from €13.9 billion in 2004 to €15.4 billion in 2005. This
increase was primarily the result of a higher total portfolio value of leasing and financing contracts and the fact that operating lease contracts comprised a larger percentage of the total portfolio.

Activities
of our Financial Services segment in the NAFTA region contributed €8.6 billion or 56% of total segment revenues in 2005, which is close to last year's
level of 54%. Revenues generated in Germany were €4.4 billion or 28% of total revenues in 2005 compared to €4.1 billion or 29% of total revenues in 2004.
Revenues derived from financial services activities in Western Europe (excluding Germany) amounted to €1.7 billion or 11% of total revenues compared to
€1.6 billion or 12% in 2004.

In
2005, the Financial Services segment originated new leasing and finance contracts with a total value of €48.2 billion compared to
€50.9 billion in 2004. Substantially all of this 5% decrease is due to the fact that in 2005 we reduced our use of sales incentives favorable to the Financial Services business.
At December 31, 2005, our Financial Services segment managed a portfolio of leasing and finance contracts of €117.7 billion, a

54

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15%
increase compared to the portfolio of €102.4 billion managed at December 31, 2004. Excluding foreign currency translation effects, the portfolio volume in 2005 was 3%
above last year's level.

Operating
profit of Financial Services was €1.5 billion in 2005, compared to €1.3 billion in 2004.

The
increased portfolio value for leasing and financing contracts and a positive development of risk costs (e.g., a lower default rate in all markets and improved credit approval
policies) had a positive effect on operating profit. Increases in interest rates, especially in the United States, however, had a negative effect on operating results.

The
increase in operating profit resulted from lower charges from our involvement in Toll Collect (€0.1 billion of losses in 2005 compared to
€0.5 billion of losses in 2004). This reduction reflects the start of revenue generating operations at Toll Collect on January 1, 2005, and decreased start up costs
incurred in 2005 compared to 2004. Last year's operating profit also included an impairment of €0.1 billion on the sale of our investment in debis AirFinance.



This segment includes our Off-Highway business, our real estate activities, the holding companies and financing subsidiaries through which the Group
refinances the capital needs of its operating businesses in the capital markets and the expenses of our corporate research activities. The segment also includes our share in the operating results of
our equity investee EADS. Following a corporate restructuring at MMC, we ceased to account for our investment in MMC using the equity method of accounting on June 29, 2004. Therefore, our Other
Activities segment includes our share of MMC's operating results only for the periods up to June 29, 2004.

Revenues
reported in our Other Activities segment originated primarily from our Off-Highway business and from our real estate business. In 2005, revenues were
€2.4 billion compared to €2.2 billion in 2004.

In
2005, our Other Activities segment recorded an operating profit of €0.6 billion which was €0.1 billion higher than in 2004. The
improvement in operating profit primarily reflects a higher positive contribution from our investment in EADS, largely due to increased Airbus deliveries and improved results in EADS' Aerospace
division. The Off-Highway business also made a higher contribution to the operating profit of the segment. These positive contributions were partially offset by increased headquarters
costs and corporate level joint venture costs.

In
December 2005, as part of our ongoing strategy to focus on our core automotive business, we agreed to sell substantially all of our Off-Highway business (with the
exception of our minority holding in VM Motori S.P.A.) to the Swedish investor group EQT. We expect to consummate the transaction in 2006 and to achieve a net cash inflow of approximately
€1.0 billion from the sale.

2004 Compared With 2003

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.



In 2004, our revenues increased 4% to €142.1 billion compared to €136.4 billion in 2003. This increase was primarily
due to significantly higher unit sales at our Commercial Vehicles segment, which in part were the result of the consolidation of MFTBC. We have included MFTBC's revenues since March 31, 2004
with a one-month lag. Chrysler Group also achieved significant revenue improvements, but these improvements were largely offset by currency translation effects. Overall, the significant
appreciation of the euro against select

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world
currencies, primarily the U.S. dollar, and lower revenues at Mercedes Car Group prevented a more significant increase in revenues. If exchange rates had remained at the prior year's level, our
revenues would have been €8.4 billion higher. Following is a brief overview of year-to-year changes in revenues of our primary business segments.

Mercedes Car Grouprevenues decreased 4% to €49.6 billion due primarily to lower unit sales of
Mercedes-Benz vehicles and a shift in the product mix to lower priced vehicles.

Chrysler Grouprevenues increased to €49.5 billion, primarily as a result of higher worldwide factory unit sales, a
lower average sales incentive expense per vehicle and a shift in product mix to higher priced vehicles, largely offset by the appreciation of the euro against the U.S. dollar. Measured in U.S.
dollars, the principal functional currency of the Chrysler Group, revenues increased 10%.

Commercial Vehiclesrevenues increased significantly from €26.8 billion in 2003 to
€34.8 billion in 2004. This increase was due in part to a €3.6 billion revenue contribution of MFTBC following its consolidation and to significantly
higher unit sales of trucks, vans and buses in all major markets. The Group's Consolidated Financial Statements include MFTBC's revenues with a one-month lag since March 31, 2004.

Financial Servicesrevenues were €13.9 billion in 2004 compared to €14.0 billion in 2003, a
1% decline. The decline in revenues resulted mainly from currency translation effects due to the appreciation of the euro.



In 2004, cost of sales were €114.6 billion compared to €109.9 billion in 2003, a 4% increase. The increase of cost
of sales is primarily the result of higher unit sales of the Commercial Vehicles segment and the consolidation of MFTBC since March 31, 2004. Higher cost of sales at the Chrysler Group segment
as a result of higher unit sales were more than offset by currency translation effects resulting from the appreciation of the euro against the U.S. dollar. Since both cost of sales and revenues at the
Group level increased comparably, our gross margin remained at 19.4%.



Selling expenses were €11.4 billion in 2004 compared to €11.8 billion in 2003, a 3% decrease. Selling expenses as a
percentage of revenues were 8.0% in 2004 compared to 8.6% in 2003. The decrease in selling expenses was predominantly the result of a combination of factors primarily affecting Chrysler Group,
including currency translation effects, partially offset by higher selling expenses from the consolidation of MFTBC.



General administrative expenses were €6.0 billion in 2004 compared to €5.4 billion in 2003. General administrative
expenses as a percentage of revenues were 4.2% in 2004 and 3.9% in 2003. The increase is primarily attributable to the consolidation of MFTBC and higher personnel costs, due in part to higher pension
and other post-retirement benefit expense. Currency translation effects, mainly as a result of the appreciation of the euro against the U.S. dollar, partially offset this increase.

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Other expenses were €0.6 billion in 2004 and €0.7 billion in 2003. The 2003 amount includes a charge of
€0.2 billion that we incurred in connection with the settlement of a class action lawsuit relating to the merger of Daimler-Benz AG and Chrysler in 1998.



Research and development expenses amounted to €5.7 billion in 2004 compared to €5.6 billion in 2003. The 2% increase
in research and development expense was mainly attributable to the consolidation of MFTBC, partially offset by currency translation effects resulting from the appreciation of the euro against the U.S.
dollar.



Other income was €0.9 billion in 2004 and €0.7 billion in 2003. The increase is primarily attributable to the
recognition of a previously deferred gain of €0.1 billion following a settlement of disputes relating to the sale of Adtranz.

Other
income also includes gains from the sale of property, plant and equipment (2004: €0.1 billion, 2003: €0.1 billion), rental income,
other than relating to financial services leasing activities (2004: €0.1 billion, 2003: €0.1 billion), and employee vehicle leasing programs at the
Chrysler Group (2004: €0.1 billion, 2003: €0.1 billion).



As a result of the Chrysler Group turnaround plan, which was initiated in 2001, we recorded restructuring charges of €0.1 billion in 2004
and €0.5 billion in 2003. The additional charges in 2004 as well as the charges incurred in 2003 relate to costs associated with the idling, closing or disposal of 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
statements of income. Otherwise, we would have reported €139 million (2003: €462 million) of these costs in cost of sales and
€6 million (2003: €7 million) in selling, administrative and other expenses.



We recorded a net financial loss of €1.1 billion in 2004 and €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.We recorded a net loss from investments of €0.6 billion in 2004
and €2.4 billion in 2003. The improvement compared to the prior year is primarily attributable to the €2.0 billion impairment of our investment in EADS
which we recognized in 2003 after determining that the decline in the market price of EADS shares was other-than-temporary. In 2004, we recorded significantly higher positive
contributions from EADS and a gain from the sale of our 10.5% interest in Hyundai Motor Company (HMC) of €0.3 billion. These effects were, however, partially offset by negative
contributions to earnings from Toll Collect and Mitsubishi Motors Corporation (MMC). Through June 29, 2004, we accounted for our investment in MMC using the equity method of accounting and
included our proportionate share in the results of MMC in our consolidated statements of income until that time. Our proportionate share for the first six months of 2004 was €(0.6)
billion and in fiscal year 2003 was €(0.3) billion. The amount for 2004 includes the loss of €0.1 billion from the dilution of our interest in MMC and
€0.2 billion of related realized pre-tax gains from currency hedging of our net investment.

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Interest expense (net).In 2004 and 2003, we recorded net interest expense of €0.3 billion and
€0.4 billion, respectively.

Other financial income (loss), net.In 2004, we had an other net financial loss of €0.2 billion while
in the prior year other financial income largely offset other financial loss. In 2004, other financial income (loss) includes an impairment charge of €0.2 billion, based on
lower estimated fair values of loans provided to debis AirFinance, an equity method investment.



In 2004, we recorded income tax expense of €1.2 billion compared to €1.0 billion in 2003. We computed income tax
expense in 2004 based on pre-tax income of €3.5 billion and in 2003 based on pre-tax income of €0.6 billion. The
non-taxable gain from the sale of our 10.5% investment in HMC, higher contributions to earnings from EADS, which are largely tax-free, and non-taxable gains
included in our net periodic pension costs and other post-retirement benefit costs more than compensated for the negative tax effect of non-tax deductible losses relating to our
investments in MMC and debis AirFinance, contributing to an overall lower effective income tax rate in 2004. Our effective tax rates in 2004 and 2003 were 33.3% and 164.3%, respectively. The high
effective tax rate for 2003 was primarily due to the non-tax deductible write-down of €2.0 billion of our equity investment in EADS combined with lower
pre-tax income in 2003. Additionally, non-tax deductible losses from our equity method investments had an additional negative impact on our income tax rate in 2003. Income tax
expense in 2003 included a tax benefit and related interest of €0.6 billion relating to agreements reached with the U.S. tax authorities on tax matters attributable to years
1986 to 1998. It also included an additional tax expense and related interest of €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 income from continuing operations was €2.5 billion in 2004 compared to a net loss from continuing operations of
€0.4 billion in 2003. Basic and diluted earnings per ordinary share from continuing operations were €2.43 in 2004, respectively, while the basic and diluted loss
per share from continuing operations was €0.41 in 2003.



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 for 2003 to reflect this presentation. Accordingly, we reclassified net income of
€14 million in 2003 as income from discontinued operations. As a result of the sale of MTU Aero Engines, we realized an after-tax gain of
€0.9 billion which is reflected in the 2003 consolidated statement of income 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 €0.88 in 2003.



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 €30 million
in 2003 (€0.03 per share).

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Net income was €2.5 billion in 2004 compared to €0.4 billion in 2003. Basic and diluted earnings per ordinary share
were €2.43 in 2004 compared to €0.44 in 2003.



In 2004, our operating profit was €5.8 billion compared to €5.7 billion in the previous year.

The
Chrysler Group and Commercial Vehicles segments developed positively and achieved a substantial increase in operating profit in 2004. Earnings of Commercial Vehicles improved
significantly despite a €0.5 billion charge for quality and recall actions at MFTBC. The Mercedes Car Group, however, recorded a significantly lower operating profit compared to
2003. Currency effects, a slight decrease of overall unit sales of Mercedes-Benz passenger cars, a shift in product mix to lower priced vehicles, a significantly larger negative
contribution from smart to the segment's operating result and expenses incurred to safeguard the products' high quality standards and for the launch of new products were the primary reasons for this
decline.

The
Financial Services segment was able to increase its operating profit due to its financial services business. The increase more than compensated for losses that arose from the
involvement in Toll Collect. In the Other Activities segment, a sizable profit contribution from EADS and the recognition of a previously deferred gain of €0.1 billion following
the settlement of all disputes connected with the sale of DaimlerChrysler Rail Systems GmbH (Adtranz) had a positive effect on operating profit in 2004. The prior year's result was assisted by a
pre-tax gain of €1.0 billion from the sale of MTU Aero Engines.

The
table on page 47 shows the business segment contributions to Group operating profit. The segment discussions below describe in more detail the specific market factors which
affected the operating results of each segment.

Segment Discussions



Revenues of our Mercedes Car Group segment decreased 4% from €51.4 billion in 2003 to €49.6 billion in 2004, while
total unit sales increased 1% from 1,216,900 to 1,226,800. Unit
sales of Mercedes-Benz vehicles declined from 1,092,200 in 2003 to 1,074,600 in 2004. Sales of smart vehicles went up 22% to 152,100 units compared to 124,700 units in 2003.

The
decline in total segment revenues was the result of slightly lower sales of Mercedes-Benz passenger cars and a shift in product mix to lower priced vehicles.
S-Class and M-Class sales declined as both models were approaching the end of their respective model cycle. E-Class sales also experienced a modest decline.
C-Class sales were strong as a result of the facelift of selected C-Class models in the spring of 2004 and the successful market launch of the all-new SLK. The
significant increase in smart unit sales was due to the market launch of the smart forfour in April 2004.

At
€15.8 billion, Mercedes Car Group revenues in Germany were 7% lower than in 2003 while unit sales decreased 1%. Germany continues to be the most important
market for our Mercedes Car Group segment with 2004 unit sales of 386,900 units. These sales represented 32% of the segment's worldwide unit sales, the same percentage as in 2003. In the other Western
European countries, Mercedes Car Group revenues were unchanged at €14.7 billion, while unit sales were 3% higher than in 2003. The disproportionate
year-to-year changes in revenues and unit sales in Germany and the rest of Western Europe are primarily the result of a shift in the product mix towards lower priced vehicles.

In
the United States, revenues decreased by €0.5 billion or 4% to €10.5 billion, while unit sales increased 2% to 222,500. The decrease in
revenues was mainly due to the appreciation of the euro against the U.S. dollar

59

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which
resulted in lower revenues after translation of U.S. dollar revenues into euros. At €2.0 billion, revenues in Japan were 17% lower than in the previous year while unit
sales decreased 10% to 41,400. In Asia (excluding Japan), revenues increased 3% to €2.8 billion while unit sales reached 51,900 units, a 3% increase over 2003 (50,200 units).

In
2004, our Mercedes Car Group segment recorded an operating profit of €1.7 billion, a 47% decline compared to the prior year. This decline was the result of
several factors: currency effects, a slight decrease of overall unit sales of Mercedes-Benz passenger cars, a shift in product mix to lower priced vehicles, a significant negative
contribution from smart to the segment's operating result, and higher expenses arising from our ongoing comprehensive quality offensive at Mercedes Car Group. Other factors were higher marketing
expenses, primarily related to the launch of the SLK, CLS and new A-Class models, and higher pre-production costs resulting from our ongoing product offensive relating mainly
to several new or updated future Mercedes-Benz vehicles. These include the successor of our M-Class, the new Compact Sports Tourer CST (the new B-Class), the new
Grand Sports Tourer GST (the new R-Class), and the S-Class successor.

smart's
unit sales improved from 2003 to 2004, but operating results failed to follow that trend and the loss contributed to operating results in 2004 was larger than in the prior year.
This further deterioration in operating results was mainly caused by higher marketing expenses, the launch of the smart forfour and higher development costs. We are in the process of reviewing and
evaluating the business model and future strategic direction of this business unit.



The Chrysler Group reported revenues of €49.5 billion in 2004 compared with revenues of €49.3 billion in 2003, an
increase of 0.4%. This increase in revenues is primarily the result of higher worldwide factory unit sales, a lower average sales incentive expense per vehicle and a shift in product mix to higher
priced vehicles, largely offset by the effect of the appreciation of the euro against the U.S. dollar. Worldwide factory unit sales, sales incentive expense and product mix were positively affected by
the successful launch of nine new products in 2004. Measured in U.S. dollars, the principal functional currency for the Chrysler Group, revenues were 10% higher than in 2003.

The
Chrysler Group had worldwide factory unit sales of 2,779,900 units in 2004 compared with 2,637,900 units in 2003, an increase of 5%. In the NAFTA region, total factory unit sales
were 2,609,700 units in 2004 compared with 2,457,800 units in 2003, an increase of 6%. Worldwide factory unit sales, including NAFTA region factory unit sales increased primarily due to the
introduction of the nine new products in 2004. Factory unit sales outside the NAFTA region were 170,200 units in 2004 compared with 180,100 units in 2003, a decrease of 5%.

In
2004, the Chrysler Group had an operating profit of €1.4 billion compared with an operating loss of €0.5 billion in 2003. The increase in
operating profit was primarily the result of higher worldwide factory unit sales, a lower average sales incentive expense per vehicle and a shift in product mix to higher margin vehicles. Net cost
improvements also contributed to the increase in operating profit.

The
Chrysler Group recorded turnaround plan charges and charges for workforce reduction actions of €0.3 billion in 2004 and €0.5 billion in
2003. The turnaround plan charges recognized in 2004 and 2003 were primarily for costs associated with the idling, closing or disposal of manufacturing facilities and workforce reduction measures.

For
a discussion of the Chrysler Group's turnaround plan, see Note 7 to the Consolidated Financial Statements.

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U.S.
dealer inventory levels were 600,600 units, representing an 81 day supply, at December 31, 2004 compared to 521,100 units, representing a 74 day supply, at
December 31, 2003. The U.S. and combined U.S. and Canada retail sales and market share data for the Chrysler Group in 2004 and 2003 are set forth below:

|                                    |  | Year Ended December 31, | 
|----------------------------------- |  | ----------------------- | 
|
|U.S. Retail Market1                 |  |                         | 
|Car sales                           |  | 474,100                 | 
|Car market share                    |  | 6.5%                    | 
|Truck sales (including minivans)    |  | 1,737,000               | 
|Truck market share                  |  | 17.4%                   | 
|Combined car and truck sales        |  | 2,211,100               | 
|Combined car and truck market share |  | 12.8%                   | 
|U.S. and Canada Retail Market1      |  |                         | 
|Combined car and truck sales        |  | 2,421,900               | 
|Combined car and truck market share |  | 12.8%                   | 

---

---

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 18.9 million units in 2004, compared with 18.6 million units in 2003, an increase of 2%.

Retail
and fleet sales of cars for the Chrysler Group in the U.S. market for 2004 increased 4% compared to 2003 while the total car market in the U.S. decreased by 2% compared to 2003.
Retail and fleet sales of trucks for the Chrysler Group in the U.S. market for 2004 increased 4% compared to 2003 while the total truck market in the U.S. increased by 5% compared to 2003. The
increase in retail and fleet sales and related market share is primarily a result of introduction of new products in 2004 as well as improving economic conditions, primarily in the U.S.



Our Commercial vehicles segment significantly increased revenues from €26.8 billion in 2003 to €34.8 billion in 2004
as a result of the consolidation of MFTBC and strong demand in our core markets Western Europe, NAFTA, and South America. Worldwide unit sales of our Commercial Vehicles segment increased 42% from
501,000 vehicles in 2003 to 712,200 units in 2004. Our total truck unit sales
increased 74% from 232,400 units to 403,300 units and our bus unit sales rose 32% from 28,300 units to 37,400 units. There was also a 13% increase in van unit sales from 230,900 units in 2003 to
260,700 units in 2004. The increase in revenues and unit sales is partially attributable to the consolidation of MFTBC which resulted in additional revenues and unit sales of
€3.6 billion and 114,800 units.

In
Germany, the most important market for our Mercedes-Benz and Setra commercial vehicles, revenues increased 7% from €6.5 billion in 2003 to
€7.0 billion in 2004, while unit sales increased 9% from 101,700 to 110,600 vehicles. Truck unit sales grew 23% and van unit sales increased 6%, while bus unit sales were 10%
lower than in 2003. In the rest of Western Europe (excluding Germany), revenues increased 12% to €7.4 billion in 2004 as overall unit sales increased 11% to 163,800 units,
primarily due to higher sales of Mercedes-Benz trucks and vans. Unit sales in Germany represented 16% and the remaining Western European market 23% of our total 2004 commercial vehicle
sales.

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In
the NAFTA region, revenues were €10.5 billion, an increase of 17% compared to 2003. Total unit sales climbed 32% to 177,100 units. The disproportionately
smaller increase of revenues was almost exclusively caused by currency translation effects resulting from the appreciation of the euro against the U.S. dollar. The significant increase in unit sales
was primarily the result of markedly higher sales of Class 8 trucks and improved sales of Class 6/7 trucks.

As
a result of the consolidation of MFTBC, our sales in Asia (including Australia) rose from 29,400 units in 2003 to 130,100 units in 2004 and revenues in that region increased from
€1.5 billion in 2003 to €5.1 billion in 2004. In 2004, MFTBC's sales declined partially due to accelerated purchases associated with new engine emission
standards which became effective in 2003 and partially due to the negative impact of past quality issues.

As
economic conditions improved in Argentina and especially Brazil, our main South American markets, we were able to increase sales in South America by 43% from 39,000 units in 2003 to
55,800 units in 2004. Consistent with the increase in unit sales, revenues in that region improved 49% to €1.5 billion in 2004.

In
2004, our Commercial Vehicles segment reported an operating profit of €1.3 billion compared to an operating profit of €0.8 billion in
2003. This significant 64% improvement is primarily the result of higher unit sales assisted by favorable market conditions and above all a broad range of updated products. Almost all businesses of
this segment contributed significant positive results to operating profit. The positive market reaction to the Mercedes-Benz Actros, increased unit sales of Freightliner trucks and buses
in the NAFTA markets, and increased unit sales of buses and vans in Western Europe and South America were the primary drivers of this positive development. Additionally, the successful implementation
of our efficiency programs in almost all of our commercial vehicle businesses further
supported the improvement in operating results. The improvements in operating profit more than offset charges of €0.5 billion arising at MFTBC due to its quality improvement
actions and recall campaigns, which originate from issues during the time before our involvement in MFTBC. Finally, the discontinuation of the engine joint venture with Hyundai Motor Company
contributed an additional €60 million to the segment's 2004 operating profit.



Revenues of our Financial Services segment declined from €14.0 billion in 2003 to €13.9 billion in 2004. This
decline was primarily the result of currency translation effects resulting from the appreciation of the euro against the U.S. dollar.

Activities
of our Financial Services segment in the NAFTA region contributed €7.6 billion or 54% of total segment revenues in 2004, a 4% decrease compared to 2003.
This decrease in the contribution rate was largely due to the adverse currency translation effects caused by the appreciation of the euro against the U.S. dollar.

Revenues
generated in Germany were €4.1 billion or 29% of total revenues in 2004 compared to €3.8 billion or 27% of total revenues in 2003.
Revenues derived from service activities in the European Union (excluding Germany) amounted to €1.6 billion or 12% of total revenues in 2004 compared to
€1.7 billion or 12% in 2003.

In
2004, our Financial Services segment processed new leasing and finance contracts with a total value of €50.9 billion compared to
€47.5 billion in 2003. Substantially all of this 7% increase in value is the result of strong financial product sales driven by sales incentive programs. At December 31,
2004, our Financial Services segment managed a portfolio of leasing and finance contracts of €102.4 billion, a 4% increase compared to the portfolio of
€98.2 billion managed at December 31, 2003. Excluding foreign currency translation effects, the portfolio volume in 2004 was 9% above last year's level.

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Operating
profit of our Financial Services segment was virtually flat at €1.3 billion in 2004 compared to 2003. The leasing and sales financing business achieved
an operating profit of €1.8 billion in 2004, compared with an operating profit of €1.5 billion in 2003. This increase in operating profit was mainly the
result of lower risk costs. The overall improvement in general risk conditions (e.g., default risk from general economic conditions) in all markets and the measures
taken to promote active risk control of the portfolio (e.g., credit approval policies) contributed to the overall reduction of risk costs. In addition, we achieved sustained high
interest-rate margins worldwide despite recent increases in interest rates, especially in the United States. The operating profit of the Financial Services business includes an impairment
charge of €0.1 billion, which is based on the estimated fair values of our share in debis AirFinance's (dAF) underlying equity and of loans provided to dAF. dAF leases aircraft
and related technical equipment to airlines and financial intermediaries. The Financial Services segment holds a 35% interest in dAF.

Increased
losses from our investment in Toll Collect substantially offset the increase in operating profit of the Financial Services business. In 2004, we recorded charges of
€0.5 billion relating to Toll Collect, primarily as a result of a revaluation of the system's total costs and additional operating expenses required to ensure timely
commencement of operations on January 1, 2005. In 2003, we recorded charges of €0.2 billion with respect to Toll Collect.



In 2004, our Other Activities segment had revenues of €2.2 billion compared to €4.1 billion in 2003. The 2004
revenues relate mostly to our business unit DC Off-Highway and to our real estate business. Revenues in 2003 included €2.2 billion from continuing operations and
€1.9 billion from discontinued operations pertaining to the MTU Aero Engines business which we sold effective December 31, 2003. Revenues generated by DC
Off-Highway amounted to €1.8 billion in 2004 and €1.7 billion in 2003.

The
operating results of this segment include our share in the operating results of our equity method investment in EADS, our Off-Highway business, our real estate activities
and the holding companies and financing subsidiaries through which the group refinances the capital needs of the operating businesses in the capital markets. The Group's equity investment in MMC is
included in the operating results of this segment only through June 29, 2004. The segment also includes the expenses of our corporate research activities.

In
2004, our Other Activities segment recorded an operating profit of €0.5 billion compared to €1.3 billion in 2003. The primary reason for
this decline was the inclusion of a pre-tax gain of €1.0 billion in 2003 following the sale of MTU Aero Engines. The 2004 operating profit primarily reflects a
further improved positive contribution from our investment in EADS, largely due to increased Airbus deliveries and improved results in EADS' Space division following a successful restructuring. A net
pre-tax gain of €0.1 billion from our settlement agreement with Bombardier also contributed to this result. These positive effects were partially offset by our share
in the losses of MMC up to June 29, 2004 (€0.1 billion) and an impairment charge of €0.1 billion relating to our investment in dAF. The Other
Activities segment holds a 10% interest in dAF. The Segment's 2004 operating profit also includes a loss of €0.1 billion from the dilution of our interest in MMC and
€0.2 billion of related realized pre-tax
gains from currency hedging of our net investment in MMC. In 2003, the operating profit of this segment included our €0.1 billion share of MMC's operating losses.

LIQUIDITY AND CAPITAL RESOURCES

In 2005, as in 2004 and 2003, 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 and through the sale of finance receivables from our financial services business (securitization transactions).

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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 and are 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. We expect to increase our capital expenditures
in property, plant and equipment slightly in 2006 compared to 2005.

Liquidity
refers to the liquid financial assets we have available to fund our business operations and pay for near term obligations. Liquid financial assets consist of cash and cash
equivalents as well as short-term securities, such as money market investments. Some of these instruments subject us to market risks that we typically hedge with interest rate swaps,
forward rate agreements, caps, floors, futures and options.

The
following table shows our liquid financial assets as of the end of each of the last three years:

December 31,2005

2004

2003(€ in billions)Cash and cash equivalents

7.7

7.8

11.0Securities

4.9

3.9

3.3Liquidity

12.6

11.7

14.3


Cash
and cash equivalents include assets with an original maturity of three months or less (2005: €7.6 billion; 2004: €7.4 billion; 2003:
€10.8 billion), and assets originally maturing after three months (2005: €0.1 billion; 2004: €0.4 billion; 2003:
€0.2 billion).

We
hold our cash and cash equivalents primarily in U.S. dollars and euros. As of December 31, 2005, U.S. dollar denominated liquid assets represented 64% and euro denominated
liquid assets represented 27% of total liquid financial assets. Liquid financial assets as a whole were 6.2% of total assets compared to 6.3% at the end of 2004. Please refer to Note 21 to the
Consolidated Financial Statements for additional information.

As
a result of our global funding and investment policies, we are exposed 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 interest rate swaps and cross currency interest
rate swaps. 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."

Analysis of Cash Flow Statement

Year ended December 31,2005

2004

2003(€ in billions)Net cash provided by operating activities

12.4

11.1

13.8Net cash used for investing activities

(11.2
)
(16.7
)
(13.6
)Net cash provided by (used for) financing activities

(1.5
)
2.5

2.5


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Cash provided by operating activitiesof €12.4 billion was €1.3 billion above the prior year's level of
€11.1 billion. The following factors contributed to this increase:



The
positive factors described above were partially offset by a period-to-period increase of trade receivables in 2005 (compared to a
period-to-period decrease in 2004); a smaller increase in trade liabilities in 2005 compared to 2004; increased cash outflows relating to other accrued liabilities, including
quality actions; and cash outflows relating to the realignment of the smart business model.

Cash used for investing activitiesdecreased by €5.5 billion to €11.2 billion. The following
factors contributed to this decrease:



The
following factors partially offset the decrease in cash used for investing activities:



Cash used by financing activitieswas €1.5 billion in 2005, compared to cash provided by financing activities of
€2.5 billion in 2004. This change was mostly due to decreased borrowings and increased repayments of financial liabilities, which were the result of decreased funding
requirements.

Cash
and cash equivalents with an original maturity of three months or less increased by €0.2 billion, a result of the cash flows mentioned above and positive
currency translation effects of €0.6 billion. In 2004, cash and cash equivalents with an original maturity of three months or less decreased by
€3.4 billion. Total liquidity, which also includes long-term investments and securities, increased from €11.7 billion in 2004 to
€12.6 billion in 2005.

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At December 31, 2005, our financial liabilities were €80.9 billion of which €36.5 billion are due within one year. This compares to
financial liabilities of €76.3 billion at the end of 2004, of which €33.3 billion were due within one year. The 2005 increase in financial liabilities
resulted primarily from currency translation effects, primarily as a result of the appreciation 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.

We
have investments in various leveraged lease transactions. Please refer to Note 18 to our Consolidated Financial Statements for further information. The U.S. Internal Revenue
Service (IRS) has challenged the tax treatment of certain leveraged leases known as Lease In, Lease Out (LILOs) and Sale In, Lease Out (SILOs) transactions by various companies, including
DaimlerChrysler, and we are currently in discussions with the IRS. Although we believe that our tax treatment is appropriate and in compliance with applicable tax law and regulations, the resolution
of this matter could have a significant negative impact on our cash flows.



Cash provided by operating activitiesof €11.1 billion was
€2.7 billion below the prior year's level. The following factors contributed to this decline:



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 €3.1 billion to €16.7 billion mostly due to
the growth of our Financial Services' portfolio which resulted in higher investments in new equipment on operating leases. In addition, proceeds from the sale of equipment on operating leases were
below the prior year's level. The net change in receivables from financial services was on a similarly high level as in the prior year.

The
following factors partially mitigated the increase in cash used for investing activities:



Inflows
from the sale of businesses included in cash used for investing activities contributed €1.2 billion in each of 2004 and 2003. In 2004, these inflows were
mainly related to the disposal of our shares in Hyundai Motor Company (€0.7 billion). In the prior year, the corresponding inflows were primarily a result of the sale of MTU
Aero Engines (€0.9 billion).

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Cash provided by financing activitiesin 2004 was affected by a net increase in financial liabilities of
€4.1 billion, partially offset by the dividend distribution of €1.5 billion. Overall, there was a net cash inflow of €2.5 billion
(2003: €2.5 billion). The net increase in financial liabilities includes proceeds of €1.3 billion (2003: €0.6 billion) from the
early termination of cross currency hedges.

At
December 31, 2004, our cash and cash equivalents with an original maturity of three months or less was €7.4 billion compared to
€10.8 billion at December 31, 2003. Our cash and cash equivalents decreased €3.1 billion as a result of our investing activities, partially offset
by our operating and financing activities. Currency translation effects also lowered the euro value of our cash and cash equivalents by €0.3 billion, leading to a total decrease
in cash and cash equivalents of €3.4 billion. Total liquidity was reduced by only €2.6 billion, as the decrease in cash and cash equivalents was partially
offset by an increase in securities. At December 31, 2004, total liquidity was €11.7 billion, down from €14.3 billion at December 31, 2003.

At
December 31, 2004, our financial liabilities were €76.3 billion of which €33.3 billion are due within one year. This compares to
financial liabilities of €75.3 billion at the end of 2003, of which €28.3 billion were due within one year. The 2004 increase in financial liabilities
resulted primarily from the funding requirements of our financial services business, partly offset by currency translation effects, primarily 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.

Principal Sources of Funding



Our policy is to maintain a high degree of flexibility in our funding activities by using a broad variety of financial instruments. Depending on our cash needs
and market conditions, we issue bonds, notes and commercial paper or execute securitization transactions in various currencies. In addition, we use credit facilities in our
day-to-day financial management.

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 the primary instruments as of December 31, 2005 and 2004:

December 31,2005

2004(€ in billions)Notes and bonds

47.4

44.7Commercial paper

9.1

6.8Borrowings from financial institutions

17.5

17.7


As
of December 31, 2005, the breakdown by currency of the financial liabilities presented in the table above was as follows: 57% in U.S. dollars, 21% in euros, 8% in Canadian
dollars, and 3% each in British pounds and Japanese yen. In most cases, our subsidiaries borrow money in their functional currency. In 2005, the aggregate borrowing rate of these financial liabilities
was 5.25%, and approximately 73% of these financial liabilities were at fixed rates.

Total
financial liabilities recognized in our consolidated financial statements, which also include deposits from our direct banking business as well as liabilities from residual value
guarantees and capital lease transactions, amounted to €80.9 billion (2004: €76.3 billion). Our total financial liabilities represented 40% of

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total
stockholders' equity and liabilities in 2005 and 42% in 2004. Please refer to Note 26 to our Consolidated Financial Statements for information on the amounts, maturities, and interest
rates of our financial liabilities.

On
a stand alone basis, our financial services entities (excluding mobility management and other non-core activities of DaimlerChrysler Financial Services AG) had financial
liabilities of €76.8 billion in 2005 and €67.9 billion in 2004. 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 vehicles which are loan-financed or on lease. These assets totaled €91.7 billion in 2005 and €80.4 billion in 2004. Sales of
receivables are a significant source of funding for us, principally in the United States. For further information about 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 34 to our Consolidated Financial Statements.

In
the United States, DaimlerChrysler North America Holding Corporation has a $25.0 billion debt securities shelf registration on file with the U.S. Securities and Exchange
Commission, of which $22.9 billion remained unused as of February 10, 2006.

In
Canada, DaimlerChrysler Canada Finance Inc. has a CAD 5.0 billion medium term note shelf registration on file with the Canadian securities authorities, of which CAD
2.3 billion remained unused as of February 10, 2006.

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, $2.3 billion remained unused as of February 10, 2006.

In
2005, the weighted average interest rate payable under our notes and bonds was 5.70%.



At December 31, 2005 and 2004, we had short- and long-term credit lines available of €35.4 billion and
€35.2 billion, respectively, of which €17.9 billion and €18.3 billion were unused as of such dates. In 2005, the weighted average
interest rate payable under our lines of credit was 4.54%. 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.

Included
in the borrowings from financial institutions were loans of approximately €0.7 billion from the European Investment Bank (EIB), which contain a rating
trigger. If any two or more of the three rating agencies Standard & Poor's Rating Services, Fitch Ratings and Moody's Investor Service assign a BBB/Baa2 rating to our senior unsecured
long-term debt, or any one of these three rating agencies assigns a rating lower than BBB/Baa2 to our senior unsecured long-term debt, then EIB has the right to demand
collateralization after consulting with us. For information about our current short-term and long-term debt ratings, see the discussion below under the heading "Credit
Ratings."

To
support our asset-backed commercial paper program in North America, a group of financial institutions has provided contractually committed liquidity facilities aggregating
$6.2 billion which expire in October 2006,

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and
are subject to annual renewal. These liquidity facilities can only be drawn upon by the special purpose entity to which our North American financial services companies may sell receivables under
this program. As of December 31, 2005, none of the liquidity facilities have been utilized.



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 €10 billion and $6.2 billion,
respectively, and, as of February 10, 2006, the unused portions under these programs were €8.3 billion and $1.9 billion, respectively.

In
2005, the weighted average interest rate payable under our commercial paper programs was 4.08%.



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. Lower ratings generally
result in higher borrowing costs and reduced access to capital markets. 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.

S&P Ratings.During the year 2005, S&P kept its long-term rating of BBB and its short-term rating of
A-2 unchanged. The outlook on the long-term rating remained stable.

Moody's Ratings.On August 1, 2005 Moody's confirmed the A-3 long-term and the P-2
short-term rating but changed the outlook on the long-term rating to negative from stable. Moody's stated that the change reflects the challenges DaimlerChrysler is facing to
strengthen margins going forward in particular of the Mercedes Car Group division and to reach a break-even position at smart. In addition, Moody's mentioned the pressure Chrysler Group is
facing in the U.S. to maintain a trend of improving profitability as a result of rising incentives and competitive pressures and the reliance on the current robustness of the performance of the
Commercial Vehicles Division. Moody's highlighted that DaimlerChrysler's A-3/P-2 ratings continue to reflect the overall strength of the Group's franchise, particularly
Mercedes-Benz's market position as a global luxury passenger car brand, the Group's scope and geographically well-spread operations and Moody's expectation that DaimlerChrysler will
continue to evidence strengthening its operating performance.

Fitch Ratings.On July 19, 2005, Fitch revised the outlook on DaimlerChrysler's BBB+ long-term rating to
stable from positive. The short-term rating was affirmed at F2. The outlook revision reflected Fitch's view that given the recent performance of the Mercedes Car Group and competitive
pressures at the Chrysler Group, an upgrade of the ratings for DaimlerChrysler is unlikely in the short term. Fitch noted that the financial profile of the Group remains strong. Cash surpluses were
used to repay industrial debt.

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Dominion Ratings.On August 2, 2005, Dominion changed the outlook of the long-term rating of
DaimlerChrysler to negative from stable. Dominion stated that the change reflects that profitability, although acceptable, is weak for the rating and that they believe that the near term prospects of
DaimlerChrysler's main businesses are mixed. Business diversity has enabled DaimlerChrysler to stay profitable and is a key strength supporting the 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 €500 million, in nominal amount, of new ordinary shares for cash until April 8, 2008, if our supervisory board approves the issuance.

The
board of management, with the consent of the supervisory board, may also issue up to €15 billion, in nominal amount, of convertible bonds and/or notes with
attached warrants, with a term of up to 20 years, prior to April 5, 2010. The convertible bonds and/or notes with attached warrants may grant to the holders or creditors up to
€300 million, in nominal amount of capital stock, in option or conversion rights for newly issued DaimlerChrysler shares.

Contractual obligations and commercial commitments

The table below presents our on- and off-balance sheet contractual obligations as of December 31, 2005:

Payments due by periodContractual Cash Obligations

Total

Less than
1 year

1  3 years

3  5 years

More than
5 years(€ in millions)Long-Term Debt

58,127

15,427

25,032

7,125

10,543Capital Lease Obligations

472

75

125

63

209Operating Leases

3,576

805

989

648

1,134Purchase and Investment Obligations

24,721

20,794

2,530

312

1,085Other Long-Term Obligations

4,672

2,417

1,532

451

272Total Contractual Obligations

91,568

39,518

30,208

8,599

13,243


---

Contractual
obligations are obligations to make payments or transfer assets under existing contracts. "Long-Term Debt" represents future principal 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. This line also includes our trade liabilities. 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. The contractual cash obligations do not reflect our pension benefit and other
post-retirement benefit obligations. For the estimated future pension benefit payments and the estimated future other post-retirement benefit payments, please refer to
Note 25a to our Consolidated Financial Statements.

Benefit Plan Obligations and Cost

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 cost. Under U.S. GAAP we subsequently recognize the accumulated differences in our Consolidated Financial Statements through amortization over future periods

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when
certain conditions are met. Please refer to the discussion above under the heading "Critical Accounting Policies  Pension and Other Post-retirement Benefits" and to Note 25a
to our Consolidated Financial Statements for further information regarding pension benefit and other post-retirement 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, alternative investments, real estate and other investments.

The
funded status of our pension benefit obligations expresses the extent to which plan assets are available to satisfy our obligations. At December 31, 2005, our pension plans
had an underfunded status of €7.2 billion compared to an underfunded status of €6.6 billion at December 31, 2004. The increase of the underfunded
status of our pension benefit plans in 2005 is mainly attributable to the reduction of the discount rates assumed for all significant plans in 2005 and currency exchange rate effects. These effects
were partly offset by the increase of the plan assets due to the total contribution of €1.7 billion in 2005 and the favorable performance of the equity markets in 2005.

U.S.
GAAP accounting rules 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 minimum pension liability do not affect our consolidated statements of income, but have an impact on other comprehensive loss and thus lead
to a corresponding reduction of stockholders' equity of €0.1 billion after taxes in 2005. The sum of our plan assets of €34.3 billion and our pension
accruals of €5.3 billion is €39.6 billion, while our total pension benefit obligations amount to €41.5 billion as of
December 31, 2005.



We do not expect to increase cash contributions to our pension plans substantially in the near term. Additional pension funding adversely affecting our liquidity
could be required if actual returns on plan assets are substantially below expected returns over an extended period of time.



Our 2005 total pension benefit expense was €1.1 billion. We estimate that our total pension benefit expense in 2006 will increase by
€0.2 billion. This is a result of higher amortization of unrecognized actuarial losses in 2006, mainly caused by the lower discount rates used in 2005.



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,
2005, our other post-retirement benefit obligations had an underfunded status of €15.8 billion compared to an underfunded status of
€12.8 billion at December 31, 2004. The increase of the underfunded status of our other post-retirement benefit obligations is mainly caused by currency
exchange rate effects and lower assumed discount rates. The sum of our plan

71

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assets
of €1.9 billion and our other post-retirement accruals of €9.8 billion is €11.7 billion, while our total other
post-retirement obligations amount to €17.7 billion as of December 31, 2005.



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



Our 2005 total other post-retirement benefit expense was €1.3 billion. We estimate that our total other post-retirement benefit
expenses will increase by €0.1 billion in 2006. This is the result of higher amortization of unrecognized net actuarial losses in 2006 mainly caused by lower discount rates used
in 2005.

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:



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 certain property plant and equipment that they use to provide vehicle components and services to us through loans or leases. We have guaranteed to
third parties some of the obligations under those leases and loans in the event the supplier defaults. We have determined that our maximum obligation as a result of these guarantees was approximately
€0.3 and €0.4 billion as of December 31, 2005 and 2004, respectively. Purchases from and corresponding cash payments made to these suppliers and service
providers in 2005 and 2004 were not material on a Group or segment basis.



We have guaranteed the indebtedness of non-consolidated affiliated companies, joint venture companies, and certain non-incorporated
companies, partnerships and project groups. We have also guaranteed the quality and timing of performance of those companies to third parties.

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With
the exception of the guarantees provided with respect to our investment in Toll Collect, our maximum total obligations under these guarantees at December 31, 2005 and 2004,
as well as the payments under these guarantees in 2005 and 2004, were not material.



As described in "Item 4. Information on the Company," we are a participant in the Toll Collect consortium. In this regard, we are contingently liable under the
following guarantees, which are subject to specific triggering events:



While
our maximum potential future obligation resulting from the guarantee of the bank loan can be determined (€600 million), we cannot accurately estimate our
maximum exposure to loss resulting from the guarantee of obligations and the guarantee in form of the equity maintenance undertaking.
Therefore, in addition to the exposure from the guarantee of the bank loan and the risks already provided for under the established accruals, our exceeding maximum exposure to loss could be material.
For additional information regarding our involvement with Toll Collect and the contingent liabilities resulting from the involvement, please refer to Note 3 to our Consolidated Financial
Statements.



We sometimes issue guarantees to customers to support the sales of our vehicles. These guarantees have different terms and durations. For example, 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 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 to us for the guaranteed residual value.

Our
maximum potential future obligation pertaining to those guarantees was €1.7 billion and €1.8 billion at December 31, 2005 and
2004, respectively, of which €0.4 billion and €0.6 billion were already accrued in our consolidated balance sheets as of those dates. The extent to which
we use such guarantees to promote our sales efforts depends to a large degree on the prevailing market environment.

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We have disposed of several investments in non-core assets and businesses over the last several years, some of which are explained in more detail in
Note 4 to our Consolidated Financial Statements. In connection with these divestitures, we provided certain guarantees and retained certain obligations of the divested companies that the buyer
did not assume.

The
maximum obligation under these guarantees as of December 31, 2005 and 2004 was approximately €0.5 billion and €0.7 billion,
respectively. Accrued liabilities recognized on our consolidated balance sheet related to those guarantees amounted to €0.3 billion as of those two dates. The decrease of our
maximum obligation is the result of expired guarantees associated with the sale of our MTU Aero Engines business.



We have granted a number of other guarantees. We guarantee 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 €0.7 billion as of December 31, 2004. In March 2005, we concluded an
additional agreement with Deutsche Bank AG that limits the guarantee for current and future credit card obligations arising from that program to €20 million. 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 32 to our Consolidated Financial Statements.

Sale of finance 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 trusts and third party entities. 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 (QSPEs) 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 beneficial interests (usually debt instruments) to third-party investors. 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. The investors in the beneficial interests have recourse to the assets in the
trusts and benefit from credit enhancements, such as overcollaterization. In a subordinated capacity, we retain residual beneficial interests in the receivables sold and in some cases provide
subordinated loans, which are designed to absorb substantially all of the credit, prepayment and interest-rate risk of the receivables transferred. Our maximum exposure to loss as a result
from our involvement with these entities is limited to the amount of the carrying value of our retained interests and subordinated loans, which are classified as "Other Assets" in our Consolidated
Financial Statements.

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The
outstanding balance of receivables we sold to QSPEs in 2005 and 2004 and the corresponding retained beneficial interests balance as of December 31, 2005 and 2004 were as
follows:

December 31,2005

2004(€ in billions)Receivables sold

19.6

16.8Retained beneficial interests in sold receivables

1.8

1.7


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 interests balance as of December 31, 2005 and 2004 were as
follows:

December 31,2005

2004(€ in billions)Receivables sold

3.8

3.4Retained beneficial interests in sold receivables

0.4

0.5


In
addition to the receivables sold as described above, we sell automotive finance receivables for which we do not retain any residual beneficial interest or credit risk ("whole loan
sales"). The outstanding balance of these sold receivables amounted to €1.9 billion.

During
the year ended December 31, 2005, we sold in total €11.6 billion (2004: €10.3 billion) of retail receivables. Under our
revolving wholesale credit facilities, we reinvested (sold) wholesale receivables of €33.9 billion (2004: €35.4 billion) in wholesale securitizations for
which we received proceeds of €33.9 billion (2004: €35.4 billion). For the services rendered with respect to the sale of receivables, we received
servicing fees of €0.2 billion in each of 2005 and 2004. In addition, we recognized gains of €0.2 billion in both 2005 and 2004 from these sales
transactions.

Please
refer to "Critical Accounting Policies  Collectibility of Financial Services Receivables  Retained Interests in Sold Receivables" and to
Note 34 to our Consolidated Financial Statements for further information on these transactions.

Research and development activities

We are party to various joint ventures, assembly contracts, or other arrangements that allow us to gain access to additional production capacity or utilize our
plants more efficiently. In addition, we source components from suppliers. These entities may also provide research and development for us and those costs are often not charged directly to us, but
instead are embedded into the cost we pay for parts once vehicle or component production has commenced. Depending on their terms and conditions, our contract manufacturing or supply arrangements may
represent variable interests.

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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. In particular, a key challenge for sustainable mobility will be the further reduction of both conventional fossil fuel 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. Maintaining and securing our position among the leading companies in the area of alternative
propulsion technologies is a cornerstone of our corporate strategy.

Our
corporate research function:



On
the corporate level, we conduct our research work in 12 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, and a research center for information and communication technology in Bangalore, India. In addition, we participate actively in the international exchange of new ideas and concepts
through cooperations and joint ventures with world renowned research institutes and exchange programs for scientists and employees.

Funding

As of December 31, 2005, our corporate research function had approximately 2,600 employees, compared to 2,900 employees in 2004 and 2003. Together with the
development departments of our business units, we employ a total of 28,300 scientists, engineers and technicians worldwide in our research, development and testing activities compared to 29,000 in
2004 and 26,700 in 2003.

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In
2005, we spent a total of €5.6 billion on research and development, including research activities at the corporate level (2004:
€5.7 billion; 2003: €5.6 billion).
Research and development costs reached 3.8% of our total revenues in 2005. Research and development costs of MTU Aero Engines are reported as discontinued operations in 2003 and are therefore not
included in the 2003 amount.

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 serve as 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 the 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 (Satzung). 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 Act
(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 shareholder representatives of the supervisory board were elected at the annual general meeting in April 2004. Robert J. Lanigan was elected for a term of office of
two years, which will expire at the

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end
of the annual general meeting of stockholders to be held on April 12, 2006. Our supervisory board has proposed Dr. Manfred Bischoff, a former member of our board of management and a
Co-Chairman of the Board of Directors of European Aeronautic Defense and Space Company EADS N.V., as a successor candidate. Hilmar Kopper was elected for a term of office of three years. All other
shareholder representatives were elected for the maximum permissible term of five years. The term of all employee representatives will expire at the end of the annual meeting 2008. Effective
April 6, 2005, Prof. Victor Halberstadt resigned from his position as a shareholder representative on the supervisory board. The stockholders elected Arnaud Lagardère at the
annual meeting in April 2005 as his successor. Mr. Lagardère's term of office will expire at the end of the annual meeting 2010.

The
following table shows the name, age (as of March 1, 2006) 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 comparable non-executive board of any other company. Employee representatives are identified by an asterisk.

|Hilmar Kopper,
    Chairman       |  | Age:
First elected:                          |  | 70
1998                                                                                                                                      
|--------------------------------- |  | -------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|                                  |  | Principal Occupation:                        |  | Chairman of the Supervisory Board of DaimlerChrysler AG                                                                                      
|                                  |  | Supervisory Board Memberships/Directorships: |  | Xerox Corporation; Unilever N.V./PLC                                                                                                         
|Erich Klemm*,
    Deputy Chairman |  | Age:
First elected:                          |  | 51
1998                                                                                                                                      
|                                  |  | Principal Occupation:                        |  | Chairman of the Corporate Works Council, DaimlerChrysler AG and DaimlerChrysler Group                                                        
|Prof. Dr. Heinrich Flegel*        |  | Age:
First elected:                          |  | 57
2003                                                                                                                                      
|                                  |  | Principal Occupation:                        |  | Director Research Materials and Manufacturing, DaimlerChrysler AG; Chairman of the Management Representative Committee, DaimlerChrysler Group
|Nate Gooden*                      |  | Age:                                         |  | 67                                                                                                                                           
|                                  |  | 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:                                         |  | 71                                                                                                                                           
|                                  |  | First elected:                               |  | 2001                                                                                                                                         
|                                  |  | Principal Occupation:                        |  | 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); Earl G. Graves, Ltd.                                                   
|                                  |  |                                              |  |                                                                                                                                              

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|Dr. Thomas Klebe* |  | Age:                                          |  | 57                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|----------------- |  | --------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                  |  | First elected:                                |  | 2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                  |  | Principal Occupation:                         |  | Director Department for General Shop Floor Policy and Codetermination, German Metalworkers' Union                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                  |  | Supervisory Board Memberships/ Directorships: |  | Saarstahl AG; DaimlerChrysler Luft- und Raumfahrt Holding AG; DaimlerChrysler Aerospace AG                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Arnaud Lagardère  |  | Age:                                          |  | 44                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                  |  | First elected:                                |  | 2005                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                  |  | Principal Occupation:                         |  | General Partner and CEO of Lagardère SCA                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                  |  | Supervisory Board Memberships/ Directorships: |  | Hachette SA; EADS N.V.; EADS Participations B.V.; Hachette Livre (SA); Hachette Distribution Services (SA); Virgin Stores (SA); Hachette Filipacchi Medias (SA); Lagardère Active (SAS); Lagardère Active Broadband (SAS); Lagardère
Active Broadcast (SA); Lagardère Active Publicité, Lagardère Active Radio International (SA); SEDI TV  TEVA (SNC); Lagardère (SAS); Lagardère Capital & Management (SAS); Arjil Committee  Arco (SA);
Lagardère Ressources (SAS); France Telecom (SA); LVMH Moet Hennessy Louis Vuitton (SA); Le Monde (SA)
|Jürgen Langer*    |  | Age:                                          |  | 51                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                  |  | First elected:                                |  | 2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                  |  | Principal Occupation:                         |  | Chairman of the Works Council of the Frankfurt/Offenbach Dealership, DaimlerChrysler AG                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Robert J. Lanigan |  | Age:                                          |  | 77                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                  |  | First elected:                                |  | 1998                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                  |  | Principal Occupation:                         |  | Chairman Emeritus of Owens-Illinois, Inc.; Founding Partner, Palladium Equity Partners                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Helmut Lense*     |  | Age:                                          |  | 54                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                  |  | First elected:                                |  | 1998                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                  |  | Principal Occupation:                         |  | Chairman of the Works Council, Stuttgart-Untertürkheim Plant, DaimlerChrysler AG                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Peter A. Magowan  |  | Age:                                          |  | 63                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                  |  | First elected:                                |  | 1998                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                  |  | Principal Occupation:                         |  | President of San Francisco Giants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                  |  | Supervisory Board Memberships/Directorships:  |  | Caterpillar Inc.; Spring Group plc                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                  |  |                                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

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|William A. Owens                |  | Age:                                         |  | 65                                                                                                                                                                
|------------------------------- |  | -------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                |  | First elected:                               |  | 2003                                                                                                                                                              
|                                |  | Principal Occupation:                        |  | Retired President and Chief Executive Officer of Nortel Networks Corporation                                                                                      
|                                |  | Supervisory Board Memberships/Directorships: |  | Polycom Inc., AEA Investors LLC                                                                                                                                   
|Gerd Rheude*                    |  | Age:                                         |  | 60                                                                                                                                                                
|                                |  | First elected:                               |  | 1999                                                                                                                                                              
|                                |  | Principal Occupation:                        |  | Chairman of the Works Council, Wörth Plant, DaimlerChrysler AG                                                                                                    
|Udo Richter*                    |  | Age:                                         |  | 59                                                                                                                                                                
|                                |  | First elected:                               |  | 2001                                                                                                                                                              
|                                |  | Principal Occupation:                        |  | Chairman of the Works Council, Bremen Plant, DaimlerChrysler AG                                                                                                   
|Wolf Jürgen Röder*              |  | Age:                                         |  | 58                                                                                                                                                                
|                                |  | First elected:                               |  | 2000                                                                                                                                                              
|                                |  | Principal Occupation:                        |  | Member of the Executive Board, German Metalworkers' Union                                                                                                         
|                                |  | Supervisory Board Memberships/Directorships: |  | Robert Bosch GmbH                                                                                                                                                 
|Dr. rer. pol.
Manfred Schneider |  | Age:
First elected:                          |  | 67
1998                                                                                                                                                           
|                                |  | Principal Occupation:                        |  | Chairman of the Supervisory Board of Bayer AG                                                                                                                     
|                                |  | Supervisory Board Memberships/Directorships: |  | Allianz AG; Metro AG; RWE AG; Linde AG; TUI AG                                                                                                                    
|Stefan Schwaab*                 |  | Age:                                         |  | 53                                                                                                                                                                
|                                |  | 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
|                                |  |                                              |  |                                                                                                                                                                   

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|Bernhard Walter       |  | Age:                                         |  | 63                                                                                                                                                   
|--------------------- |  | -------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|                      |  | First elected:                               |  | 1998                                                                                                                                                 
|                      |  | Principal Occupation:                        |  | Former Spokesman of the Board of Management of Dresdner Bank AG                                                                                      
|                      |  | Supervisory Board Memberships/Directorships: |  | Bilfinger Berger AG; Deutsche Telekom AG; Henkel KGaA; KG Allgemeine Leasing GmbH & Co.; Staatliche Porzellan-Manufaktur Meissen GmbH; Wintershall AG
|Lynton R. Wilson      |  | Age:                                         |  | 65                                                                                                                                                   
|                      |  | First elected:                               |  | 1998                                                                                                                                                 
|                      |  | Principal Occupation:                        |  | Chairman of the Board of CAE Inc.; Chairman Emeritus, Nortel Networks Corporation                                                                    
|                      |  | Supervisory Board Memberships/Directorships: |  | CAE Inc.                                                                                                                                             
|Dr.-Ing. Mark Wössner |  | Age:                                         |  | 67                                                                                                                                                   
|                      |  | First elected:                               |  | 1998                                                                                                                                                 
|                      |  | Principal Occupation:                        |  | Former CEO and Chairman of the Supervisory Board of Bertelsmann AG                                                                                   
|                      |  | Supervisory Board Memberships/Directorships: |  | Citigroup Global Markets Deutschland AG & Co KGaA; Douglas Holding AG; eCircle AG; Loewe AG; Reuters AG; Heidelberger Druckmaschinen AG              

The
supervisory board held five meetings in 2005. It 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, which is 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 and deputy members, all of whom have the same rights and duties. Our board of management currently has nine 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
table below shows the name and age (as of March 1, 2006) 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 current term expires, his current position/area of responsibility and the last prior position he held. The table also reflects the following changes on our board of
management that occurred in 2005 and January 2006 following decisions by our supervisory board and its presidential committee:



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Dr.-Ing. Dieter Zetsche

Age:
First appointed:
Term expires:
Responsible for:
Prior Positions:

52
1998
2010
Chairman of the Board of Management and Head of Mercedes Car Group
Member of the Board of Management  Chrysler Group
Member of the Board of Management  Commercial VehiclesGünther Fleig

Age:
First appointed:
Term expires:
Responsible for:
Prior Position:

57
1999
2009
Human Resources & Labor Relations Director
President of DaimlerChrysler France S.A.S.Dr. phil. Rüdiger Grube

Age:
First appointed:
Term expires:
Responsible for:
Prior Position:

54
2001
2007
Corporate Development
Deputy Member of the Board of Management  Corporate DevelopmentThomas W. LaSorda

Age:
First appointed:
Term expires:
Responsible for:
Prior Positions:

51
2004
2007
Chrysler Group
Member of the Board of Management  Chief Operating Officer Chrysler Group; Senior Vice President, Production, Chrysler GroupAndreas Renschler

Age:
First appointed:
Term expires:
Responsible for:
Prior Position:

47
2004
2007
Truck Group
Executive Vice President Mercedes Car Group Business Unit smartEric R. Ridenour

Age:
First appointed:
Term expires:
Responsible for:
Prior Positions:

47
2005
2008
Chief Operating Officer Chrysler Group
Executive Vice President, Product Development & Quality, Chrysler Group; Vice President, Premium Vehicle Product Team & Core Team Leader, Chrysler Group; Vice President, Product Planning, Chrysler GroupThomas W. Sidlik

Age:
First appointed:
Term expires:
Responsible for:
Prior Position:

56
1998
2008
Global Procurement & Supply
Member of the Board of Management  Procurement & Supply Chrysler GroupBodo Uebber

Age:
First appointed:
Term expires:
Responsible for:
Prior Position:

46
2003
2011
Finance & Controlling / Financial Services
Deputy Member of the Board of Management  Services


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Dr.-Ing. Thomas Weber

Age:
First appointed:
Term expires:
Responsible for:
Prior Position:

51
2003
2010
Group Research & MCG Development
Deputy Member of the Board of Management  Research & Technology


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
€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 €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 (other than compensation paid to employee
representatives on the supervisory board in their capacity as DaimlerChrysler employees) for the year ended December 31, 2005, was €2.0 million. The individual
compensation received by our supervisory board members for their service on DaimlerChrysler AG's supervisory board in 2005 is listed below.

|Name               |  | Compensated Function(s)                                             |  | Compensation (in €)
|------------------ |  | ------------------------------------------------------------------- |  | -------------------
|Hilmar Kopper      |  | Chairman of the Supervisory Board                                   |  | 243,700            
|Erich Klemm1       |  | Vice Chairman of the Supervisory Board                              |  | 168,700            
|Heinrich Flegell   |  | Member of the Supervisory Board                                     |  | 80,500             
|Nate Gooden2       |  | Member of the Supervisory Board                                     |  | 79,400             
|Earl G. Graves     |  | Member of the Supervisory Board                                     |  | 77,200             
|Victor Halberstadt |  | Member of the Supervisory Board                                     |  | 20,826             
|Thomas Klebe1, 3   |  | Member of the Supervisory Board and the Presidential Committee      |  | 107,400            
|Arnaud Lagardère5  |  | Member of the Supervisory Board                                     |  | 56,579             
|Jürgen Langer1     |  | Member of the Supervisory Board                                     |  | 80,500             
|Robert J. Lanigan  |  | Member of the Supervisory Board                                     |  | 80,500             
|Helmut Lense1      |  | Member of the Supervisory Board                                     |  | 80,500             
|Peter A. Magowan   |  | Member of the Supervisory Board                                     |  | 80,500             
|William A. Owens   |  | Member of the Supervisory Board                                     |  | 80,500             
|Gerd Rheude1       |  | Member of the Supervisory Board                                     |  | 80,500             
|Udo Richter1       |  | Member of the Supervisory Board                                     |  | 80,500             
|Wolf Jürgen Röder1 |  | Member of the Supervisory Board                                     |  | 80,500             
|Manfred Schneider  |  | Member of the Supervisory Board and the Presidential Committee      |  | 106,300            
|Stefan Schwaab1    |  | Member of the Supervisory Board and the Audit Committee             |  | 111,800            
|Bernhard Walter    |  | Member of the Supervisory Board and Chairman of the Audit Committee |  | 164,300            
|Lynton R. Wilson4  |  | Member of the Supervisory Board                                     |  | 80,500             
|                   |  |                                                                     |  |                    

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|Mark Wössner |  | Member of the Supervisory Board |  | 80,500
|------------ |  | ------------------------------- |  | ------

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Board of Management

We have entered into service agreements with members of our board of management. These agreements established the following three principal elements of
compensation in 2005:



The
service agreements with members of our board of management also generally provide that if the company terminates the agreement without serious cause, the board member is entitled to
severance pay consisting of his base salary for the remaining term of the agreement and any variable compensation pro rated through the
member's last day of service. Our supervisory board may also negotiate additional or different terms with individual members of the board of management at the commencement or termination of their
service agreement.

The
presidential committee of our supervisory board has established stock ownership guidelines for the board of management. These guidelines require a portion of the personal assets of
members of our board of management to consist of DaimlerChrysler shares.

The
compensation paid by Group companies to the members of our board of management consisted of compensation paid in cash and benefits in kind. This included
€9.3 million for fixed, €24.6 million for

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short-term
and mid-term and €1.0 million for long-term incentive compensation components, corresponding to a sum of
€34.9 million in 2005.

In
2005, we granted 454,914 performance phantom shares to members of our board of management. The cash pay-out for these shares will be in 2009 in the event of continuous
service on the board of management and dependent on the achievement of internal and external goals.

Stock
options granted in 2003 became exercisable in 2005. Members of the board of management exercised 167,500 of those stock options.

In
addition to the amounts described above, we paid board of management members whose service ended in 2005 compensation earned by them through their last day of service, which consisted
of pro rated payments of the medium-term incentive awards and phantom share awards previously granted to them. We also had expenditures in connection with certain previously accrued
retirement benefit obligations of other board of management members. The aggregate amount of the foregoing payments and expenditures was €23.8 million.

The
aggregate amount accrued by us during the year ended December 31, 2005, to provide pension, retirement and similar benefits for the members of the board of management was
€23.7 million.

For
further information regarding compensation of our supervisory board and our board of management, please refer to Note 38 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, 2005, we employed a workforce of 382,724 people worldwide, which represented a decrease of 1% from year-end 2004. The decrease
in 2005 resulted primarily from the workforce reduction initiative at the Mercedes Car Group (employees who had voluntarily left the company as of December 31, 2005) and productivity
improvements at Chrysler Group. The following table shows the number of our employees at December 31, 2005, 2004, and 2003:

Employees at December 31,2005

2004

2003Total

Germany

U.S.

Total

Germany

U.S.

Total

Germany

U.S.Mercedes Car Group5

104,345

91,556

4,472

105,857

93,679

3,409

104,151

93,756

2,191Chrysler Group5

83,130

8

63,749

84,375

2

65,169

93,062

183

73,835Commercial Vehicles1, 2, 5

117,183

45,607

20,977

114,602

43,566

20,506

88,014

41,630

17,320Sales organization for automotive business5

48,773

27,541

1,882

48,029

28,101

1,820

45,609

27,920

1,739Financial Services

11,129

2,779

4,602

11,224

2,984

4,679

11,035

2,825

4,756Other Activities2, 3, 4, 5

18,164

14,569

1,798

20,636

16,822

2,536

20,192

16,425

2,550DaimlerChrysler Group

382,724

182,060

97,480

384,723

185,154

98,119

362,063

182,739

102,391


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On average, we had approximately 12,300 temporary employees in 2005.

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 senior 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 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 collective bargaining agreement covering the period from
March 1, 2004, through February 28, 2006. The agreement provides for staggered pay increases, the last of which provides for an aggregate 2.7% wage increase for all employees for the
period March 1, 2005, through February 28, 2006. Of this increase employees received a portion as lump sum payments in March and October 2005. After deducting the lump sum
payments and the amount held back to offset transition costs associated with reforming the collective framework agreement, the wage increase for that period was 2.0%. In February 2006, the
association of employers and the unions began negotiating a new collective bargaining agreement.

On
July 28, 2004, DaimlerChrysler AG and the works council of DaimlerChrysler AG agreed on a reform covering more than 160,000 employees in all German plants and the sales
organization of DaimlerChrysler AG. The agreement aims to improve DaimlerChrysler AG's competitiveness, mainly by limiting future labor cost increases and increasing work flexibility. In return,
DaimlerChrysler AG provides job guarantees to all employees who were employed before July 28, 2004, until December 31, 2011.

At
the end of September 2005, the board of management approved a package of measures to be taken to reduce personnel levels at the Mercedes Car Group in Germany by 8,500 jobs.
These staff reductions are to be achieved by means of voluntary severance agreements over the next twelve months. For further information, please refer to the discussion under the heading "Mercedes
Car Group" in "Item 4. Description of Business."

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. The agreement covers more than
56,000 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. Along with a national agreement, DaimlerChrysler
Corporation also negotiated local agreements with UAW bargaining units at each of its facilities.

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In
September 2005, DaimlerChrysler Canada, Ltd. and the CAW agreed to a three-year collective bargaining agreement that covers approximately 10,000 workers in
Canada. It provides, among other things, for modest wage, pension and benefit increases for employees and provides the company more flexibility in staff deployment in order to improve productivity in
its plants.

SHARE OWNERSHIP

As of December 31, 2005, the current members of our supervisory board and our board of management, as a group, owned 200,736 of our ordinary shares (0.02%
of all outstanding shares) and had the right to acquire 7,547,800 ordinary shares pursuant to options granted under the plans described below.

In
2000, we instituted a shareholder approved stock option plan for board of management members and other levels of management. We granted options under this plan in 2000, 2001, 2002,
2003 and 2004. Our predecessor, Daimler-Benz AG, instituted a shareholder approved stock option plan for management board members and other senior executives in 1996. For a description of
these stock option plans and further details, such as the exercise prices, please refer to Note 24 to our Consolidated Financial Statements.

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 2005, each eligible employee of our companies incorporated in Germany had the right to
acquire up to 90 shares with a maximum aggregate discount of €135 plus one bonus share. Employees of our German companies acquired a total of approximately 723,000 shares in 2005. 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 23,500 shares in 2005.

Please
refer to Notes 1 and 24 to our Consolidated Financial Statements for additional information.

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.

As
of December 31, 2005, the Kuwait Investment Authority as agent for the Government of the State of Kuwait, held 73,169,320 shares or 7.2% of our outstanding shares. It was the
only shareholder holding more than 5% of our ordinary shares as of that date. Deutsche Bank AG, which held 11.8% of our ordinary shares as of December 31, 2004, significantly reduced its
holding in the course of 2005 to less than 5% of our outstanding shares.

As
of December 31, 2005, we had approximately 1.5 million stockholders. Approximately 255,000 were U.S. holders, of which approximately 65,000 were record holders. Based on
our share register, U.S. holders held approximately 17% of our ordinary shares as of that date.

For
further information, please refer to "Share Ownership" in "Item 6. Directors, Senior Management and Employees."

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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
companies in which we hold an ownership interest and companies that are affiliated with certain members of our supervisory board and our board of management.

Deutsche
Bank AG, which held 11.8% of our ordinary shares as of December 31, 2004, significantly reduced its holding in the course of 2005 to less than 5% of our outstanding
shares. During 2005, 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, which amounted to €651 million as of December 31, 2004, was reduced to €20 million during 2005. We have never incurred nor do we
expect to incur any significant losses under this guarantee. In 2004, we entered into a securities lending agreement with Deutsche Bank AG concerning 22,227,478 of our shares in EADS (approximately 3%
of the voting stock). As collateral, we received a lien on a securities account of a value equivalent to the shares loaned by us.

We
have provided several guarantees for the benefit of Toll Collect, a joint venture in which we hold a 45% equity interest. For additional information on these guarantees, please refer
to the discussion under the heading "Off-Balance Sheet Arrangements" in "Item 5. Operating and Financial Review and Prospects" and to Note 3 to our Consolidated Financial
Statements. Mr. Walter, a member of our supervisory board, is also a member of the supervisory board of Deutsche Telekom AG, one of the other investors in Toll Collect.

In
recent years, we initiated several cooperation projects with Mitsubishi Motors Corporation (MMC). In November 2005, we sold our remaining 12.4% equity interest in MMC. Current
cooperation projects are not affected by the sale, and will continue as previously agreed. Examples of such projects are the joint development and production of engines, the shared use of vehicle
architecture and the joint production of passenger cars, sports utility vehicles and pickup trucks in Europe, North America, China and South Africa.

We
have an agreement with McLaren Cars Ltd., a wholly owned subsidiary of McLaren Group Ltd., for the production of the Mercedes McLaren SLR super sports car. We own a 40%
equity interest in McLaren Group Ltd.

We
incurred expenses of approximately $800,000 in 2005 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.

Dr. Mark
Wössner, a member of our supervisory board, received payments for premises leased to our wholly owned subsidiary Westfalia Van Conversion GmbH amounting to
€1 million in 2005.

From
time to time, DaimlerChrysler Group companies may purchase goods and services (primarily advertising) from, and sell or lease vehicles or provide financial services to,
Lagardère Group companies in the ordinary course. Arnaud Lagardère, who became a member of our supervisory board in April 2005, is the general partner and chief
executive officer of their ultimate parent company, Lagardère SCA, a publicly traded company.

We
engage in commercial transactions negotiated at arms length with our equity investee EADS. We do not consider these transactions to be material to us either individually or in the
aggregate. Mr. Lagardère, a member of our supervisory board, is also one of two chairmen of the board of directors of EADS.

In
July 2005, DaimlerChrysler Corporation and Haden Prism, LLC (Haden) entered into an agreement under which Haden will construct and operate a vehicle paint facility within the
Chrysler Group's manufacturing complex in Toledo, Ohio, as part of a supplier co-location project scheduled to begin operation in 2006. Haden Prism is an indirect subsidiary of Haden
International Group, Inc., which is 75% owned by Palladium Equity Partners (Palladium), a private investment firm with investments in several other companies.

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Robert
J. Lanigan, a member of our supervisory board, is a partner and investor in Palladium. The parties are in negotiations, following a default declared by DCC, pursuant to which DCC would acquire
the paint facility from Haden in exchange for assuming related indebtedness and releasing Haden and its affiliates, including Palladium and its partners, from any related claims. Mr. Lanigan
has not participated in any negotiations with the company concerning these matters.

DaimlerChrysler
Canada Inc. paid CAD1.2 million to a subsidiary of Mosaic Sales Solutions Holding Company for field marketing services pursuant to a competitively bid
contract awarded in April 2005. The chief executive officer of the subsidiary, Tony LaSorda, is the brother of Thomas LaSorda, a member of our board of management who assumed responsibility for
the Chrysler Group in September 2005.

Item 8. Financial Information.

CONSOLIDATED FINANCIAL STATEMENTS

Please refer to "Item 18. Financial Statements" and to pages F-i, F-1 through F-94 of this annual report.

OTHER FINANCIAL INFORMATION

Export Sales

In 2005, we exported approximately 811,400 or 69% of all passenger cars and commercial vehicles we produced in Germany and approximately 375,500 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" in "Item 4. Information
on the Company."

As
previously reported, the official receiver of Garage Bernard Tutrice S.A., France, a former customer of DaimlerChrysler France S.A.S., filed a lawsuit against DaimlerChrysler France
in the commercial court of Versailles in November 2003. The complaint seeks damages of €455 million alleged to have resulted from tax fraud committed by the former
Chairman of Tutrice S.A., who was convicted of tax fraud in April 2001. In January 2006, the court ordered DaimlerChrysler France to pay €30 million in
compensatory damages, and rejected the rest of the claim.

In
October 2005, DaimlerChrysler Australia/Pacific Pty. Ltd. ("DCAuP") settled the previously reported actions filed in the Supreme Court of New South Wales by National
Australia Bank Limited and the liquidator in connection with the financial failure of a customer. The settlement agreement provides for payment by DCAuP of AUD 55 million and a release from all
further claims.

As
previously reported, DaimlerChrysler AG in its capacity as successor of Daimler-Benz AG is a party to a valuation proceeding
(Spruchstellenverfahren) relating to a subordination and profit transfer agreement that existed between Daimler-Benz AG and the former AEG
AG. In 1988, former AEG shareholders filed a petition with the regional court in Frankfurt claiming that the consideration and compensation stipulated in the agreement was inadequate. In1994, a
court-appointed valuation expert concluded that the consideration provided for in the agreement was adequate. Following a Federal Constitutional Court decision in an unrelated case, the Frankfurt
court in 1999 instructed the expert to employ a market value approach in its valuation analysis rather than the capitalized earnings value approach previously used. The court also instructed the
expert in 2004 to take into account additional findings of the Federal Supreme Court elaborating further on the valuation issue addressed by the Federal Constitutional Court. In September 2004,
the expert delivered the

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requested
valuation opinion. If the new opinion were to be followed by the Frankfurt court, the valuation ratio would increase significantly in favor of the AEG shareholders. DaimlerChrysler believes
the original consideration and compensation to be adequate and the second valuation opinion to be unwarranted. DaimlerChrysler intends to defend itself vigorously against the claims in this
proceeding.

In
1999, former shareholders of Daimler-Benz AG instituted a valuation proceeding (Spruchstellenverfahren) against
DaimlerChrysler AG at Stuttgart district court. These proceedings relate to the merger of Daimler-Benz AG and DaimlerChrysler AG in connection with the business combination of
Daimler-Benz and Chrysler Corporation in 1998. In the course of the merger, 1.8% of all shares in Daimler-Benz AG were involuntarily exchanged for DaimlerChrysler shares. Some
shareholders claim that the ratio used in the course of the merger did not correspond to the actual value of the Daimler-Benz shares. An expert commissioned by the court presented his
report in December 2005. In it, he has calculated various alternative values for payments to be made. The alternatives range from confirming the appropriateness of the ratio used to
considerable payments to be made to the former Daimler-Benz shareholders with respect to the involuntarily exchanged shares. DaimlerChrysler continues to view the exchange ratio set by the
company at the time as appropriate, and the alternative values calculated by the court expert as unfounded. We intend to continue defending ourselves vigorously against these claims.

As
previously reported, various legal proceedings are pending against DaimlerChrysler or its subsidiaries alleging defects in various components (including occupant restraint systems,
seats, brake systems, tires, ball joints, engines and fuel systems) in several different vehicle models or allege design defects relating to vehicle stability (rollover propensity), pedal
misapplication (sudden acceleration), brakes (vibration and 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 damage to property, personal injuries or wrongful death. Adverse decisions in one or
more proceedings could require DaimlerChrysler or its subsidiaries to pay partially substantial compensatory and punitive damages, or undertake service actions, recall campaigns or other costly
actions.

Seven
purported class action lawsuits are pending in various U.S. courts regarding alleged front disc brake judder in 1999 - 2004 model year Jeep®
Grand Cherokee vehicles and the treatment of related warranty claims. Plaintiffs seek compensatory and punitive damages, costs of repair or replacement, attorney's fees and costs.

As
previously reported, 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.

As
previously reported, in November 2004 a jury awarded $3.75 million in compensatory damages and $98 million in punitive damages against DaimlerChrysler Corporation
in Flax v. DaimlerChrysler Corporation, a case filed in Davidson County Circuit Court in the state of Tennessee. The complaint alleged that the seat back in a 1998 Dodge Grand Caravan was defective
and collapsed when the Caravan was struck by another vehicle resulting in the death of an occupant. In June 2005 the trial court reduced the punitive damage award to $20 million in
response to motions filed by DaimlerChrysler Corporation challenging the verdict and the damage awards. DaimlerChrysler Corporation is appealing the verdict and the damage awards.

As
previously reported, in October 2005, the Arizona Court of Appeals reversed the $50 million punitive damages award and affirmed the $3.75 million compensatory
damages award in Douglas v. DaimlerChrysler Corporation, a case involving the front seat back strength of a 1996 Dodge Ram club cab pickup. DaimlerChrysler Corporation is defending approximately 25
other complaints involving vehicle seat back strength.

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The
U.S. Environmental Protection Agency filed a complaint in the U.S. District Court for the District of Columbia against DaimlerChrysler Corporation in December 2005 alleging
defects in catalytic converters and on-board diagnostic systems in certain Chrysler Group vehicles, and failure to properly disclose
defects in such converters. The parties have agreed to the terms of a consent decree in settlement of the complaint. The settlement requires DaimlerChrysler Corporation to, among other things, extend
the warranties on catalytic converters in certain 1996 - 2000 vehicles, and reprogram the powertrain control modules in certain 1996 - 1998 vehicles
with updated onboard diagnostic systems calibrations. DaimlerChrysler Corporation also settled a related parallel administrative proceeding with the California Air Resources Board. The estimated cost
of such remedial actions and related settlement payments is approximately $95 million.

Like
other companies in the automotive industry, DaimlerChrysler (primarily DaimlerChrysler Corporation) has 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 primarily 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
2005. 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. 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, a class action lawsuit was filed in 2002 against Mercedes-Benz USA, LLC ("MBUSA"), and its wholly-owned subsidiary Mercedes-Benz
Manhattan, Inc., and is pending in the United States District Court for the District of New Jersey. The lawsuit alleges that those companies participated in a price fixing conspiracy among
Mercedes-Benz dealers. MBUSA and Mercedes-Benz Manhattan 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 EU 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 EU competition rules and imposed a fine of approximately €72 million. On September 15, 2005, the Court of First Instance of the European Court of
Justice annulled the decision in part and reduced the fine to an amount of €9.8 million. Neither party appealed the judgment, which is now final.

As
previously reported, more than 80 purported class action lawsuits alleging violations of antitrust law are pending 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.

DaimlerChrysler
Services North America LLC ("DCSNA") settled the two previously reported class action lawsuits alleging racially discriminatory credit practices. The court approved
settlements require, among other

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things,
training programs for employees, consumer financial literacy programs, and community outreach for African-Americans and Hispanics.

As
previously reported, the Federal Republic of Germany has initiated arbitration proceedings against DaimlerChrysler Financial Services AG, Deutsche Telekom AG and Toll Collect GbR. The
statement of claims of the Federal Republic of Germany was received in August 2005. The Federal Republic of Germany is mainly seeking damages, contractual penalties and the transfer of
intellectual property rights to Toll Collect GmbH. In particular, the Federal Republic of Germany is claiming lost revenues of €3.51 billion plus interest
(€236 million through July 31, 2005) for the period September 1, 2003, through December 31, 2004, and contractual penalties of approximately
€1.65 billion through July 31, 2005 plus interest (€107 million through July 31, 2005). Since some of the contractual penalties, among other
things, are dependent on time and further claims for contractual penalties have been asserted by the Federal Republic of Germany, the amount claimed as contractual penalties may increase.
DaimlerChrysler believes the claims of the Federal Republic of Germany are without merit and intends to defend itself vigorously against these claims.

As
previously reported, Freightliner LLC acquired in September 2000 Western Star Trucks Holdings Ltd. Prior to its acquisition by Freightliner, Western Star had completed
the sale of a truck manufacturer, ERF (Holdings) plc, to MAN AG for CAD195 million. In September 2002, MAN filed a claim against Freightliner Ltd. (formerly Western Star) with the
London Commercial Court for fraud and breach of representations and warranties in the share purchase agreement, alleging that ERF's accounts and financial statements were misstated and seeking damages
in excess of GBP300 million. Freightliner Ltd. subsequently filed a contribution claim with that court against Ernst & Young, ERF's and Western Star's auditors. In
October 2005, the court ruled that Freightliner Ltd. was vicariously liable for fraud by an employee of ERF in connection with the preparation of ERF's financial accounts, and also found
in favor of Ernst & Young on the contribution claim. Freightliner Ltd. has appealed both decisions on liability. In December 2005, the court awarded MAN an interim payment of
GBP250 million, based on a minimum estimate of the parties, which amount significantly exceeds Freightliner Ltd.'s net assets. A hearing to determine final damages may be deferred until
resolution of the appeals. In a related matter, MAN sued Freightliner LLC in February 2005 alleging that assets were fraudulently transferred from Freightliner Ltd. while the above
described proceeding was pending, and seeking payment from Freightliner LLC of the damages awarded against Freightliner Ltd. in that proceeding. The complaint, which was amended in
December 2005, is pending in Multnomah County Circuit Court in the state of Oregon. Freightliner LLC intends to defend itself vigorously in this matter.

As
previously reported, Tracinda Corporation filed a lawsuit in 2000 against DaimlerChrysler AG and some of the members of its Supervisory Board and Board of Management alleging 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. On
April 7, 2005, the United States District Court for the District of Delaware rendered a judgment in favor of the defendants and against Tracinda Corporation on all claims finding that there had
been no fraud and no violation of U.S. securities laws. Tracinda is appealing the decision and filed its opening brief with the United States Court of Appeals for the Third Circuit in
January 2006.

As
previously reported, a purported class action was filed against DaimlerChrysler AG and some members of its Board of Management in 2004 in the United States District Court for the
District of Delaware on behalf of current or former DaimlerChrysler shareholders who are neither citizens nor residents of the United States and who acquired their DaimlerChrysler shares on or through
a foreign stock exchange. On January 24, 2006, the Court granted DaimlerChrysler's motion to dismiss the complaint, declining to exercise jurisdiction over the case. The complaint, which had
not yet been served on any member of DaimlerChrysler's board of management, contained allegations similar to those in the Tracinda complaint and the prior class action complaint. On
February 17, 2006, the plaintiffs filed a notice of appeal of this decision to the United States Court of Appeals for the Third Circuit.

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As
previously reported, several lawsuits, including putative class action lawsuits, were filed in 2002 against a large number of companies from a wide variety of industries and
nationalities asserting claims relating to the practice of apartheid in South Africa. One of the lawsuits names DaimlerChrysler AG as a defendant and another one names a U.S. subsidiary of
DaimlerChrysler AG as a defendant. The lawsuits were consolidated in the United States District Court for the Southern District of New York for pretrial purposes. On November 29, 2004, the
Court granted a motion to dismiss filed by a group of defendants, including DaimlerChrysler. Plaintiffs filed notices of appeal of the Court's decision. The appeal has now been fully briefed. Oral
argument was held in January 2006.

As
previously reported, in August 2004, the U.S. Securities and Exchange Commission (SEC) opened a formal investigation into possible violations by DaimlerChrysler of the anti
bribery, record keeping and internal control provisions of the U.S. Foreign Corrupt Practices Act (FCPA). The U.S. Department of Justice (DOJ) has also requested information in this regard. We are
voluntarily sharing with the DOJ and the SEC information from our own internal investigation of certain accounts, transactions and payments, primarily relating to transactions involving government
entities, and are providing the agencies with information pursuant to outstanding subpoenas and other requests. We have also had communications with the office of the public prosecutor in Stuttgart,
Germany, regarding these matters. Following is a summary of information we have uncovered to date in connection with our internal investigation. Further issues may arise as we complete our
investigation.

We
have determined that improper payments were made in a number of jurisdictions, primarily in Africa, Asia and Eastern Europe. These payments raise concerns under the U.S. FCPA, German
law, and the laws of other jurisdictions.

In
connection with our internal investigation, we have identified and self-reported potential tax liabilities to tax authorities in several jurisdictions. These tax
liabilities of DaimlerChrysler AG and certain foreign affiliates result from misclassifications of, or the failure to record, commissions and other payments and expenses.

We
determined that certain payable accounts related to consolidated subsidiaries were not eliminated during consolidation.

We
are taking action to address and resolve the issues identified in the course of our investigation to safeguard against the recurrence of improper conduct. This includes evaluating and
revising our governance policies and our internal control procedures. Please also refer to "Item 15. Controls and Procedures" for additional information.

In
connection with these issues, we recognized charges in our 2005 consolidated statement of income to correct misstatements relating to the years 2003 and 2004 which had the effect of
reducing 2005 operating profit by €16 million and reducing 2005 net income by €64 million. In addition, we have adjusted stockholders' equity as at
January 1, 2003 to correct accumulated misstatements in the periods 1994 through 2002 which had the effect of reducing the January 1, 2003 balance of stockholders' equity by
€222 million. As previously reported, we recognized a charge of €125 million in the third quarter of 2005 with respect to tax liabilities that had been
identified in the course of the internal investigation by the date the unaudited interim financial statements for the third quarter 2005 were issued. Following our continued investigation of the
misstatements discussed above, we subsequently determined that any adjustments for pre-2003 periods should be reflected in the January 1, 2003 balance of stockholders' equity.
Accordingly, we reversed €100 million of the €125 million charge originally recognized in the third quarter 2005. This amount is reflected in the
€222 million reduction of the January 1, 2003 balance of stockholders' equity.

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In
order to safeguard against the recurrence of the type of conduct that resulted in these issues, we have taken a series of voluntary remedial actions, including the following:

We
have initiated improvements in our business processes as well as in compliance, control and training activities in order to foster a culture defined by openness and honesty.

We
are evaluating and revising our policies, procedures and controls and are conducting a comprehensive review and remediation of any related books and records, tax and internal control
issues identified. We are also establishing a global compliance organization so that our business practices are thoroughly reviewed, and our policies upgraded and enforced as necessary.

We
have initiated personnel measures related to questionable transactions or behavior identified in the course of our internal investigation. These actions include the severance of
employment and suspensions of several employees.

Our
internal investigation into possible violations of law is ongoing. If the DOJ or the SEC determines that violations of U.S. law have occurred, it could seek criminal or civil
sanctions, including monetary penalties, against DaimlerChrysler and certain of its employees, as well as additional changes to its business practices and compliance programs.

We
also determined that for a number of years a portion of the taxes related to compensation paid to expatriate employees was not properly reported. In connection with this underpayment
of taxes, we recognized charges in our 2005 consolidated statement of income to correct corresponding overstatements relating to the years 2003 and 2004 which had the effect of reducing 2005 operating
profit by €34 million and reducing 2005 net income by €25 million. In addition, we adjusted stockholders' equity as at January 1, 2003 to correct
accumulated overstatements of net income in the periods 1994 through 2002 which had the effect of reducing the January 1, 2003 balance of stockholders' equity by
€84 million. We voluntarily reported potential tax liabilities resulting from these issues to the tax authorities in several jurisdictions. As indicated above, we are taking
various remedial actions to address these issues.

As
previously reported, in November 2004 the SEC issued a formal order of investigation concerning 13 named participants in the United Nations Oil-for-Food
Program seeking to determine whether there had been acts in violation of the provisions of the Securities Exchange Act of 1934 requiring the maintenance of books, records and accounts, the maintenance
of internal accounting controls and prohibiting specified payments to foreign officials for improper purposes. In July 2005, the SEC supplemented the formal order of investigation to add
DaimlerChrysler to the list of named companies. In that regard, we received an order from the SEC to provide a written statement and to produce certain documents regarding transactions in that
Program. DaimlerChrysler is responding to the SEC's request. The DOJ has also requested information in this regard. In addition, the United Nations Independent Inquiry Committee (IIC) that
investigated the administration and management of the United Nations Oil-for-Food Program asked DaimlerChrysler to provide assistance in the IIC's evaluation of certain
transactions under that Program. On October 27, 2005, the IIC issued its final report on the United Nations Oil-for-Food Program, which includes a narrative describing
DaimlerChrysler's alleged conduct during the Program. In its report, the IIC concludes that DaimlerChrysler knowingly made or caused to be made a kickback payment of approximately
€6,950 to the former Government of Iraq, that a DaimlerChrysler employee signed two side agreements to make additional payments, and that this conduct was in contravention of Program
rules and the United Nations sanctions against Iraq. It is possible that additional payments may be identified as a result of the ongoing SEC and DOJ investigations. If the DOJ or the SEC determines
that violations of U.S. law have occurred, it could seek criminal or civil sanctions, including monetary penalties, against DaimlerChrysler and certain of its employees.

As
previously reported theBundesanstalt für Finanzdienstleistungsaufsicht, or BaFin, (German Federal Financial Supervisory
Authority) is investigating whether DaimlerChrysler AG's public ad hoc disclosure on July 28, 2005 that Professor Schrempp will leave the company at the end of 2005 was timely. If the BaFin
determines that the company improperly filed such disclosure, it could fine DaimlerChrysler up to €1 million. In a related matter, the District Attorney's Office in Stuttgart
closed the previously reported investigation of alleged insider trading in DaimlerChrysler shares by two DaimlerChrysler senior executives prior to the ad hoc

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disclosure.
In January 2006 the District Attorney's Office also opened an investigation of alleged insider tipping by the Chairman of our Supervisory Board in advance of such disclosure. In
February 2006, shareholders of DaimlerChrysler who claim damages based on the alleged unduly delayed ad hoc disclosure filed an application for a model case pursuant to German law
(Kapitalanleger-Musterverfahrensgesetz).

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.

Dividend Policy

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 additional
information on dividends and exchange rates please refer to "Item 3. Key Information" and "Item 10. Additional Information."

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 Düsseldorf, Hamburg, Hanover, Munich, Stuttgart and at the Berlin-Bremen stock exchange, 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."

DaimlerChrysler
AG has been included in the Deutsche Aktienindex (DAX), a continuously updated, capital weighted performance index of the 30 largest German companies, since the merger of
Daimler-Benz and Chrysler in November 1998. The DAX is the leading index of trading on the Frankfurt Stock Exchange. As of December 31, 2005, our ordinary shares represented
approximately 7.01% of the DAX. Our shares also represented 1.37% of the Dow Jones STOXX 50sm, which covers stocks from eight European equity markets, and 2.23% 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

Our ordinary shares trade on the floor of the Frankfurt Stock Exchange, the most significant of the eight German stock exchanges, and also on Xetra, which stands
for Exchange Electronic Trading. Xetra is an integrated electronic exchange system which is an integral part of the Frankfurt Stock Exchange. In 2005, Xetra accounted for approximately 98% of the
trading volume of our ordinary shares at the Frankfurt Stock Exchange. The table below shows, for the periods indicated, the Xetra high and low sales prices for our ordinary shares.

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Price Per
DaimlerChrysler Ordinary Share1High

Low(€)

(€)Annual highs and lows2001

58.19

27.242002

55.44

28.162003

37.58

23.712004

39.41

31.632005

45.65

30.20Quarterly highs and lows2004First Quarter

39.41

32.89Second Quarter

39.20

33.56Third Quarter

38.05

33.20Fourth Quarter

35.60

31.632005First Quarter

36.30

33.69Second Quarter

34.59

30.20Third Quarter

45.65

33.06Fourth Quarter

45.48

39.77Monthly highs and lows2005July

40.12

33.06August

42.69

40.06September

45.65

40.49October

45.48

39.77November

44.08

41.15December

43.60

42.102006January

47.32

42.66February (through February 10, 2006)

48.07

47.17


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On February 10, 2006, the closing sales price for our ordinary shares on Xetra was €48.04. This price was equivalent to
$57.26 per ordinary share, translated at the noon buying rate for euros on that date. 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." 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 2005 was 6.0 million. As of December 31, 2005, the market capitalization of our company on the Frankfurt Stock Exchange was €43.9 billion.

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Trading on the New York Stock Exchange

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 Share1High

Low($)

($)Annual highs and lows2001

52.72

25.602002

50.88

29.782003

46.85

26.272004

49.26

40.202005

54.83

39.03Quarterly highs and lows2004First Quarter

49.26

40.42Second Quarter

47.40

40.20Third Quarter

46.05

40.62Fourth Quarter

48.50

40.462005First Quarter

47.68

44.11Second Quarter

44.40

39.03Third Quarter

54.83

39.68Fourth Quarter

53.86

47.68Monthly highs and lows2005July

48.42

39.68August

52.16

49.20September

54.83

49.84October

53.86

47.68November

51.83

49.15December

51.58

50.072006January

57.32

51.41February (through February 10, 2006)

58.11

56.69


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On February 10, 2006, the closing sales price for our ordinary shares on the New York Stock Exchange as reported on the NYSE Composite Tape
was $57.76.

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. 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.

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For
information on shares and options held by members of our supervisory board, our board of management, and our other senior executives, 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."

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:

The
Annual General Meeting of Shareholders  ratifies the actions of the corporation's supervisory board and board of management. At the annual general meeting,
shareholders resolve upon the amount of the annual dividend, the appointment of an independent auditor, and certain significant corporate transactions. The annual general meeting further elects the
shareholder representatives of our supervisory board. The annual general meeting must be held within the first eight months of each fiscal year.

The
Supervisory Board  As required by the German Stock Corporation Act (Aktiengesetz), the German
Co-determination Act (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. The principal function of the supervisory board is to supervise and advise
our board of management. The supervisory board also appoints and removes the members of the board of management. The supervisory board may not make management
decisions. In accordance with the German Stock Corporation Act (Aktiengesetz), however, our supervisory board has determined categories of transactions
which 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 (Aktiengesetz) 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. The board of management submits regular reports to the supervisory board about the corporation's operations,
business strategies, financial condition and other important matters affecting its performance and profitability. It also prepares special reports upon request. A person may not serve on the board of
management and the supervisory board of a corporation at the same time.

Several
of our specific corporate governance provisions are summarized below.

Business Purposes

As stated in Section 2 of our memorandum and 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:



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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 financial
service transactions as well as banking and real property transactions that require a government license.

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. The board members are not liable to our company
if they acted pursuant to a lawful resolution of the shareholders' meeting. The German Stock Corporation Act (Aktiengesetz) also provides that a board
member is not liable for breach of duty if the board member makes a business decision that he or she reasonably believes is based on appropriate information and is in the company's interest.
Supervisory board or board of management members are not obligated to own shares of the corporation to qualify for the board membership. According to German law, our supervisory board and board of
management members may not receive a loan from us unless approved by our supervisory board. 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. German law stipulates that our supervisory board and board of management members may not vote on a matter that
concerns ratification of his or her own acts or discharges the board member from liability or enforcement of a claim against the board member by our company. The presidential committee of our
supervisory board determines the compensation of 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 annual general meeting of shareholders in 2004, we introduced varying terms of office for the shareholder representatives of our supervisory board. 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:

Capital Increases.In accordance with resolutions passed by our shareholders, we may increase our share capital in
consideration of cash or non-cash contributions by establishing authorized capital or conditional capital. Authorized capital provides our board of management with the flexibility to issue
new shares during a

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period
of up to five years, generally to preserve liquidity. Conditional capital allows the issuance of new shares for specified purposes, including employee stock option plans, mergers, and upon
conversion of option bonds and convertible bonds. Authorized and conditional capital increases require an approval by 75% of the issued shares present at the shareholders' meeting at which the
increase is proposed. Our articles of association do not contain conditions regarding changes in the share capital that are more stringent than the law requires.

Redemption.Our share capital may be reduced in accordance with a resolution of our shareholders' meeting.

Preemptive Rights.Our articles of association provide that the preemptive right of shareholders to subscribe
(Bezugsrecht) for any issue of additional shares in proportion to their shareholdings in the existing capital may be excluded under certain
circumstances.

Liquidation.If we (DaimlerChrysler AG) were to be liquidated, any liquidation proceeds remaining after all of our
liabilities are paid would be distributed to our shareholders in proportion to their shareholdings.

No Limitation on Foreign or Substantial Ownership.Neither German law nor our articles of association limit the rights of
persons who are not citizens or residents of Germany, or who hold a substantial number of our shares, with respect to holding or voting our ordinary shares.

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 approves
the unconsolidated financial statements (prepared in accordance with German GAAP) of the Group's parent company, DaimlerChrysler AG, proposed by our board of management for each fiscal year and both
boards 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 holding
shares on the date of the annual general meeting are entitled to receive the dividend. We pay dividends to shareholders in proportion to their percentage ownership of our outstanding capital stock. A
shareholder's right to claim a dividend expires on the fourth anniversary of the end of the year in which the entitlement to the dividend arises.

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 authorized and conditional 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 any resolution imposing

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additional
obligations on shareholders requires the consent of all affected shareholders in order to be effective. German law further 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 outstanding shares may call a meeting of shareholders.
There is no minimum quorum requirement for shareholder meetings. At the annual general meeting we present the financial statements, the consolidated financial statements, the management reports for
DaimlerChrysler AG and the Group and the report of the supervisory board. We further ask our shareholders to ratify the actions of our board of management and supervisory board during the prior year
and to approve the disposition of unappropriated profit (determined in accordance with German GAAP) of the Group's parent company, DaimlerChrysler AG, and to appoint the independent auditor proposed
by the supervisory board on recommendation of 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.

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 €500,000 of the company's capital stock.

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.

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 Financial Supervisory Authority (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 shareholder has acquired shares representing 30% of the voting power, it must make an offer for all remaining shares of

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the
target. The German 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. We are obliged to publish these notifications in a mandatory exchange newspaper of national circulation.

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. The claim must be brought within six months from the day of the annual meeting of shareholders. Admission of an action against the supervisory board and board of management members on
behalf of the company may be claimed by
shareholders holding in the aggregate at least 10% of the issued shares or shares representing at least €100,000 of our capital stock. The competent court will allow the action to
proceed if (i) the shareholders acquired their shares before any information was published from which they became aware of the alleged breach of duty or damage; (ii) the company failed
to file a suit itself within a reasonable period of time after being asked to do so by the shareholders; (iii) facts exist that justify the suspicion that the company has suffered damage
by dishonesty or gross breach of the law or the articles; and (iv) there are no overriding interests of the company against the assertion of such damage claim.

German Corporate Governance Code Declaration

We, like other publicly traded companies in Germany, are subject to the German Corporate Governance Code that recommends specific governance practices. The Code
was issued in 2002 by a government appointed commission and amended most recently in June 2005. 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 or, if not, which recommendations have not or are not being
applied. Shareholders must be given permanent access to such declaration. 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_161aktg.

Disclosure in accordance with the listing standards of the New York Stock Exchange (NYSE)

A general description of the differences between DaimlerChrysler's corporate governance practices and those applicable to U.S. companies as required by the NYSE
corporate governance listing standards is available on our website atwww.daimlerchrysler.com/corpgov_e_nyse.

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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:



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 effective rate of 21.1% (consisting of a 20% withholding tax and an effective 1.1% surcharge). U.S. shareholders 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 withholding taxes that

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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 for the net $150 of German withholding tax.

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.

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 IRS
Form 6166, Certification of United States Residency 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. For more information about Form 6166 please refer to "Other Refund Procedures" below.

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

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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: (i) the German tax authorities at the same address where you will have to file your claim, which is: Bundeszentralamt für Steuern, D-53221 Bonn, Germany or
(ii) the Embassy of the Federal Republic of Germany at 4645 Reservoir Road, N.W., Washington, D.C. 20007-1998.

If
you have not done so within the past three years, you must also submit to the German tax authorities IRS Form 6166, Certification of United States Residency. A shareholder
seeking the Form 6166 certification must complete IRS Form 8802, Application for United States Residency Certification. Form 8802 and the related instructions can be found on the
IRS website athttp://www.irs.gov.

You
must send the completed Form 8802 and all required statements and documentation to the Internal Revenue Service  Philadelphia Service Center, U.S. Residency
Certification Request, P.O. Box
16347, Philadelphia, PA 19114-0447, USA. You can also fax your request to the Philadelphia Service Center at 215-516-1035. The Certification requests are generally
processed within 30 days from the date received. You can obtain additional information, including IRS Publication 686, which describes the procedures for obtaining this certification, from the
IRS website atwww.irs.gov/pub/irs-pdf/p686.pdf. The IRS will send the certification directly to the German tax authorities if you authorize
the IRS 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

The maximum rate of United States federal income tax on qualified dividend income received by an individual (and certain trusts and estates) is 15%. This 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 generally 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 121-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.

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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 2005 DaimlerChrysler dividend paid on April 7, 2005, to shareholders of
record on April 6, 2005, 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 6, 2005 through June 6, 2005.

Form 1099-DIV
for 2005 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 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 100 F Street, N.E., Washington, D.C. 20549 and at the Commission's regional offices at 175 W. Jackson Boulevard, Suite 900, Chicago, Illinois
60604, and 3 World Financial Center, Room 4300, New York, New York 10281. You may also obtain copies of these materials by mail from the Public Reference Room of the Commission at 100 F Street, N.E.,
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 at www.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.

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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. Other than equity price risk resulting from investments accounted for under
the equity method, which are not considered in this quantitative and qualitative analysis, we are only exposed to equity price risk to a minor extent. We seek to manage and control these market risks
primarily through our regular operating and financing activities, but we also use derivative financial instruments when we deem it appropriate. We evaluate these market risks by monitoring changes in
key economic indicators and market information on an ongoing basis.

In
addition, we are exposed to commodity price risk associated with our business operations.

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.

For
a description of how we account for derivative financial instruments refer to Note 33 to our Consolidated Financial Statements.

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 total 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 33 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 U.S. dollar, the British pound, the Japanese yen, and other world currencies against the euro. 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

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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, but only to a minor degree because of its global production network. Our Chrysler Group segment generates almost all its revenues and incurs most of its
costs in U.S. dollars. Therefore, the transaction risk of this segment is relatively low compared to that of the Mercedes Car Group segment. Our Other Activities segment is indirectly exposed to
transaction risks through its equity investment in EADS, which we account for using the equity method.

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 U.S. 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.

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. Our currency committee consists of members of senior management from our
corporate treasury department, our vehicle business segments and our risk controlling department. 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.

The
following table shows the period-end, high, low and average value-at-risk figures for our 2005 and 2004 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. The offsetting transactions underlying our
derivative financial instruments, predominantly forecasted transactions, are not included in the following value-at-risk presentation.

|                   |  | 2005 |  | 2004
|------------------ |  | ---- |  | ----
|
|
|Exchange Rate Risk |  | 281  |  | 322 

The
average value-at-risk of our derivative financial instruments used to hedge exchange rate risk in 2005 is comparable to that of 2004. The increase in the
period-end value-at-risk is primarily a result of a higher U.S. dollar volume in foreign exchange derivatives.

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 may significantly affect the translation of, for example, revenues, operating profit

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and
net 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.

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 Financial Services segment. Our Financial
Services companies enter 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 2005 and 2004 portfolio of interest rate sensitive
financial instruments, including our leasing and sales financing business. We have computed the average exposure based on an end-of-quarter basis.

|                   |  | 2005 |  | 2004
|------------------ |  | ---- |  | ----
|
|
|Interest Rate Risk |  | 89   |  | 92  

---

In
2005, the average and the period-end value-at-risk of our portfolio of interest rate sensitive financial instruments increased, primarily due to more volatile
interest rates and the weakening euro, mainly in the relation to the U.S. dollar.

EQUITY PRICE RISK

We hold investments in equity securities and equity derivatives. 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. Equity derivatives used to hedge the market price risk of investments accounted for using the equity method are also not
included in this assessment. Changes in the fair market value of these derivatives essentially offset changes in the fair market value of the underlying investment. The remaining equity price risk in
2005 and 2004 was not, and is not currently, material to us. Thus, we are not presenting the value-at-risk figures for our equity price risk. Please refer to Note 33 to
our Consolidated Financial Statements for additional information about our financial instruments and their fair market values.

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COMMODITY PRICE RISK

We are exposed to changes in prices of commodities, such as steel, used in the manufacturing of vehicle components. For further information about commodities
refer to the discussion under the heading "Supplies and Raw Material" in "Item 4. Information on the Company."

To
a minor extent, we use derivative commodity instruments to reduce some of our commodity price risk, mainly our risk associated with the purchase of precious metals. The risk resulting
from these derivative commodity instruments in 2005 and 2004 was not, and is currently not significant to us. Therefore, we are not presenting the value-at-risk figures for
these derivative commodity instruments.

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.

Disclosure 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. Our management, with the participation of the chairman of our board of management and the
member of our board of management responsible for Finance & Controlling/Financial Services, has evaluated, as of December 31, 2005, our disclosure controls and procedures, as such term
is defined under Rules 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934. Based on such evaluation, the chairman of our board of management
and the member of the
board of management responsible for Finance & Controlling/Financial Services have concluded that, as of December 31, 2005, our disclosure controls and procedures are effective to achieve
their intended objectives.

Internal Control over Financial Reporting.As a result of the matters identified in the course of the internal investigation described
under the heading "Legal Proceedings" in "Item 8. Financial Information," as well as other matters discussed under Note 1 to our Consolidated Financial Statements, we made changes to our
internal control over financial reporting (as such term is defined in Rule 13a-15 of the Exchange Act) during 2005. Additionally, other changes to our internal controls over
financial reporting with regard to these matters are underway and will be fully implemented during 2006.



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We
also instituted a group-wide training program to reinforce knowledge of, and compliance with, applicable accounting and legal provisions. Additionally, we instituted a series of
communication initiatives to establish a "tone at the top" that compliance with applicable legal requirements and our integrity code including tax, accounting and
anti-bribery provisions is a core value of the Company and its employees. We have also taken personnel actions, including severance of employment and suspensions.

Item 16A. Audit Committee Financial Expert.

Our supervisory board has determined that Mr. Bernhard Walter is an "audit committee financial expert" as that term is defined by SEC rules, and that he is
"independent" as that term is defined under applicable New York Stock Exchange listing standards.

Item 16B. Code of Ethics.

Our supervisory board has 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/coe.

Item 16C. Principal Accountant Fees and Services.

In the annual meeting held on April 6, 2005, our shareholders appointed KPMG Deutsche Treuhand Gesellschaft Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft (KPMG DTG), Berlin and Frankfurt am Main to serve as our independent auditor for the 2005 fiscal year. For additional information regarding the
appointment of our independent auditor please refer to "Item 6. Directors, Senior Management and Employees." The following table summarizes fees charged in connection with professional services
provided by KPMG DTG and other independent member firms within the international KPMG network for each of the last two fiscal years.

Year Ended December 31,2005

2004(€ in millions)Audit Fees

42

39Audit-Related Fees

11

14Tax Fees

5

6All Other Fees

4

5Total

62

64


---

"Audit
Fees" are the aggregate fees billed or expected to be billed for the audit of our consolidated and annual financial statements, reviews of interim financial statements,
attestation services that are provided in connection with statutory and regulatory filings or engagements as well as business system controls audits. "Audit-Related Fees" are fees billed for services
rendered during the respective fiscal years 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 for the audit of employee benefit plans and pension schemes, agreed-upon procedure engagements and other attestation services subject to
regulatory requirements, advisory services associated with our financial reporting, as well as attestation services pertaining to our internal controls over financial reporting. "Tax Fees" are fees
billed for services rendered during the respective fiscal years for tax compliance services, tax advice on actual or contemplated

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transactions,
tax consulting associated with international transfer prices, and expatriate employee tax services. Fees disclosed under the category "All Other Fees" are fees billed for services
rendered during the respective fiscal years for advisory services in connection with our internal controls over financial reporting. This category also includes other immaterial support services.

Audit Committee's pre-approval policies and procedures

Our audit committee nominates and engages our independent auditor to audit our financial statements. For additional information regarding our audit committee and
the appointment of our independent auditor, please refer to "Item 6. Directors, Senior Management and Employees." In 2003, our audit committee 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 Services, Audit Related Services, Tax Services, and Other Services that may be performed by our independent auditors. In addition, the audit committee limited the
aggregate amount in fees our independent auditors may receive during the 2005 fiscal year for non-audit services in certain categories.

Our
Chief Accounting Officer reviews all individual management requests to engage our independent 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 chairman on a case-by-case basis. The audit committee's chairman is not permitted to approve any engagement of
our independent 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.

Item 16D. Exemptions from the Listing Standards for Audit Committees.

Mr. Erich Klemm and Mr. Stefan Schwaab are employees of DaimlerChrysler who are non-executive officers serving on our supervisory board
and our audit committee consistent with German law (Co-Determination Act) and the company's rules of procedure for the supervisory board. As such, they are exempt under
Rule 10A-3(b)(1)(iv)(C) of the Securities Exchange Act of 1934 from the New York Stock Exchange listing standard for audit committees relating to "independence." We do not believe
that their status as employees materially adversely affects the ability of the audit committee to act independently.

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Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

The following table sets out certain information concerning purchases by us during 2005:

|Period                      |  | (a) Total Number
of Shares
Purchased |  | (b) Average Price
Paid per Share |  | (c) Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Plans or
Programs |  | (d) Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans or
Programs
|--------------------------- |  | ------------------------------------ |  | -------------------------------- |  | ------------------------------------------------------------------------------------ |  | ----------------------------------------------------------------------------------
|January 1/1/05 - 1/31/05    |  | 0                                    |  | 0.00                             |  | N/A                                                                                  |  | N/A                                                                               
|February 2/1/05 - 2/28/05   |  | 1,139                                |  | 35.55                            |  | N/A                                                                                  |  | N/A                                                                               
|March 3/1/05 - 3/31/05      |  | 445,170                              |  | 34.92                            |  | N/A                                                                                  |  | N/A                                                                               
|April 4/1/05 - 4/30/05      |  | 0                                    |  | 0.00                             |  | N/A                                                                                  |  | N/A                                                                               
|May 5/1/05 - 5/31/05        |  | 0                                    |  | 0.00                             |  | N/A                                                                                  |  | N/A                                                                               
|June 6/1/05 - 6/30/05       |  | 159,067                              |  | 34.06                            |  | N/A                                                                                  |  | N/A                                                                               
|July 7/1/05 - 7/31/05       |  | 3                                    |  | 34.88                            |  | N/A                                                                                  |  | N/A                                                                               
|August 8/1/05 - 8/31/05     |  | 0                                    |  | 0.00                             |  | N/A                                                                                  |  | N/A                                                                               
|September 9/1/05 - 9/30/05  |  | 0                                    |  | 0.00                             |  | N/A                                                                                  |  | N/A                                                                               
|October 10/1/05 - 10/31/05  |  | 138,159                              |  | 41.73                            |  | N/A                                                                                  |  | N/A                                                                               
|November 11/1/05 - 11/30/05 |  | 1,821                                |  | 42.86                            |  | N/A                                                                                  |  | N/A                                                                               
|December 12/1/05 - 12/31/05 |  | 0                                    |  | 0.00                             |  | N/A                                                                                  |  | N/A                                                                               
|Total                       |  | 745,359                              |  | 36.02                            |  | N/A                                                                                  |  | N/A                                                                               

---

The
shares recorded in the above table relate solely to purchases of DaimlerChrysler AG's ordinary shares made under our supported employee stock ownership programs.

Purchases
of DaimlerChrysler AG's ordinary shares made by our sponsored pension and other post-retirement benefit plans are not recorded in the above table. Our sponsored pension and
other post-retirement benefit plans purchased in 2005 an aggregate amount of 2,985,428 ordinary shares of DaimlerChrysler AG for an average price per share of €41.07.

115

---





PART III

Item 17. Financial Statements.

Not applicable.

Item 18. Financial Statements.

You can find our Consolidated Financial Statements on pages F-i, F-1 through F-94.

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.
|7.   |  | Ratios of Earnings to Fixed Charges                                                                                                                                                                                                                                                                                                                                                                                                                             
|8.1  |  | Significant subsidiaries owned, directly or indirectly, by DaimlerChrysler AG as of December 31, 2005, 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 / Financial Services 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 |  | Consent of Independent Registered Public Accounting Firm.                                                                                                                                                                                                                                                                                                                                                                                                       
|99.1 |  | Declaration by the Board of Management and Supervisory Board of DaimlerChrysler AG pursuant to §161 Joint Stock Corporation Act (AktG) regarding the German Corporate Governance Code in effect as of June 2,
2005.                                                                                                                                                                                                                                             

116

---



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:
March 6, 2006

| |  | DAIMLERCHRYSLER AG
| |  | ------------------
| |  | BY:               
| |  | By:               

117

---





DAIMLERCHRYSLER AG

Index to Consolidated Financial Statements

|                                                        |                                                                                                                 | Page
|------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------- | ----
|Report of Independent Registered Public Accounting Firm |                                                                                                                 | F-1 
|Consolidated Financial Statements:                      |                                                                                                                 |     
|                                                        | Consolidated Statements of Income (Loss) for the years ended December 31, 2005, 2004 and 2003                   |     
|                                                        | Consolidated Balance Sheets at December 31, 2005 and 2004                                                       |     
|                                                        | Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2005, 2004 and 2003 |     
|                                                        | Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003                      |     
|                                                        | Consolidated Fixed Assets Schedule for the year ended December 31, 2005                                         |     
|                                                        | Notes to the Consolidated Financial Statements                                                                  |     

F-i

---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The
Supervisory Board
DaimlerChrysler AG:

We
have audited the accompanying consolidated balance sheets of DaimlerChrysler AG and subsidiaries ("DaimlerChrysler") as of December 31, 2005 and 2004, and the related
consolidated statements of income, changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2005. 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 the standards of the Public Company Accounting Oversight Board (United States). 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, 2005
and 2004, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2005, in conformity with generally accepted
accounting principles in the United States of America.

As
described in Note 11 to the consolidated financial statements, DaimlerChrysler adopted FASB Interpretation No. 47, "Accounting for Conditional Asset Retirement
Obligations  an interpretation of FASB Statement No. 143" in 2005. 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 3 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.

KPMG
Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft

Stuttgart,
Germany
February 23, 2006

F-1

---



DAIMLERCHRYSLER AG AND SUBSIDIARIES
Consolidated Statements of Income (Loss)

|                                                                                                                                           |                                                                                                                                                                                           |                                                        |  | Consolidated |     
|------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------ |  | ------------ | ----
|
|
|                                                                                                                                           |                                                                                                                                                                                          
|Revenues                                                                                                                                   |                                                                                                                                                                                           | 35.                                                    |  | 149,776      |     
|                                                                                                                                           |                                                                                                                                                                                          
|Cost of sales                                                                                                                              |                                                                                                                                                                                           | 5.                                                     |  | (122,894     | )   
|                                                                                                                                           |                                                                                                                                                                                          
|Gross profit                                                                                                                               |                                                                                                                                                                                           |                                                        |  | 26,882       |     
|                                                                                                                                           |                                                                                                                                                                                          
|Selling, administrative and other expenses                                                                                                 |                                                                                                                                                                                           | 5.                                                     |  | (18,984      | )   
|                                                                                                                                           |                                                                                                                                                                                          
|Research and development                                                                                                                   |                                                                                                                                                                                           |                                                        |  | (5,649       | )   
|                                                                                                                                           |                                                                                                                                                                                          
|Other income                                                                                                                               |                                                                                                                                                                                           | 6.                                                     |  | 966          |     
|                                                                                                                                           |                                                                                                                                                                                          
|Goodwill impairment                                                                                                                        |                                                                                                                                                                                           | 12.                                                    |  | (30          | )   
|                                                                                                                                           |                                                                                                                                                                                          
|Turnaround plan Chrysler Group                                                                                                             |                                                                                                                                                                                           | 7.                                                     |  | 36           |     
|                                                                                                                                           |                                                                                                                                                                                          
|Income before financial income                                                                                                             |                                                                                                                                                                                           |                                                        |  | 3,221        |     
|                                                                                                                                           |                                                                                                                                                                                          
|                                                                                                                                           | Impairment of investment in EADS                                                                                                                                                          |                                                        |  |              |    
|                                                                                                                                           |                                                                                                                                                                                          
|                                                                                                                                           | Other financial income (expense), net (therein loss on issuance of associated company stock of €135 million in 2004 and gain on issuance of related company stock of €24 million in 2003) |                                                        |  |              | 217 
|                                                                                                                                           |                                                                                                                                                                                          
|Financial income (expense), net                                                                                                            |                                                                                                                                                                                           | 8.                                                     |  | 217          |     
|                                                                                                                                           |                                                                                                                                                                                          
|Income (loss) before income taxes                                                                                                          |                                                                                                                                                                                           |                                                        |  | 3,438        |     
|                                                                                                                                           |                                                                                                                                                                                          
|Income tax (expense) benefit                                                                                                               |                                                                                                                                                                                           | 9.                                                     |  | (513         | )   
|                                                                                                                                           |                                                                                                                                                                                          
|Minority interests                                                                                                                         |                                                                                                                                                                                           |                                                        |  | (74          | )   
|                                                                                                                                           |                                                                                                                                                                                          
|Income (loss) from continuing operations                                                                                                   |                                                                                                                                                                                           |                                                        |  | 2,851        |     
|                                                                                                                                           |                                                                                                                                                                                          
|Income from discontinued operations, net of taxes                                                                                          |                                                                                                                                                                                           | 10.                                                    |  |             |     
|                                                                                                                                           |                                                                                                                                                                                          
|Income on disposal of discontinued operations, net of taxes                                                                                |                                                                                                                                                                                           | 10.                                                    |  |             |     
|                                                                                                                                           |                                                                                                                                                                                          
|Cumulative effects of changes in accounting principles: transition adjustments resulting from adoption of FIN 47 and FIN 46R, net of taxes |                                                                                                                                                                                           | 11.                                                    |  | (5           | )   
|                                                                                                                                           |                                                                                                                                                                                          
|Net income (loss)                                                                                                                          |                                                                                                                                                                                           |                                                        |  | 2,846        |     
|                                                                                                                                           |                                                                                                                                                                                          
|Earnings per share                                                                                                                         |                                                                                                                                                                                           | 36.                                                    |  |              |     
|                                                                                                                                           |                                                                                                                                                                                          
|Basic earnings 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                                                                                                                                                                                |                                                        |  |              | 2.80
|                                                                                                                                           |                                                                                                                                                                                          
|Diluted earnings 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                                                                                                                                                                                |                                                        |  |              | 2.80
|                                                                                                                                           |                                                                                                                                                                                          

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 Services1,2 |   |        
|-------------------- | - | --------------------- | - | -------
|
|
|                     |   |                       |   |        
|134,340              |   | 128,133               |   | 122,397
|                     |   |                       |   |        
|(110,326             | ) | (103,771              | ) | (98,937
|                     |   |                       |   |        
|24,014               |   | 24,362                |   | 23,460 
|                     |   |                       |   |        
|(17,725              | ) | (16,741               | ) | (16,374
|                     |   |                       |   |        
|(5,649               | ) | (5,658                | ) | (5,571 
|                     |   |                       |   |        
|921                  |   | 833                   |   | 637    
|                     |   |                       |   |        
|(30                  | ) |                      |   |       
|                     |   |                       |   |        
|36                   |   | (145                  | ) | (469   
|                     |   |                       |   |        
|1,567                |   | 2,651                 |   | 1,683  
|                     |   |                       |   |        
|                    |   |                      |   | (1,960 
|                     |   |                       |   |        
|192                  |   | (1,043                | ) | (775   
|                     |   |                       |   |        
|192                  |   | (1,043                | ) | (2,735 
|                     |   |                       |   |        
|1,759                |   | 1,608                 |   | (1,052 
|                     |   |                       |   |        
|133                  |   | (442                  | ) | (352   
|                     |   |                       |   |        
|(63                  | ) | 113                   |   | (30    
|                     |   |                       |   |        
|1,829                |   | 1,279                 |   | (1,434 
|                     |   |                       |   |        
|                    |   |                      |   | 14     
|                     |   |                       |   |        
|                    |   |                      |   | 882    
|                     |   |                       |   |        
|(5                   | ) |                      |   | (30    
|                     |   |                       |   |        
|1,824                |   | 1,279                 |   | (568   
|                     |   |                       |   |        
|                     |   |                       |   |        
|                     |   |                       |   |        
|                     |   |                       |   |        
|                     |   |                       |   |        
|                     |   |                       |   |        
|                     |   |                       |   |        
|                     |   |                       |   |        
|                     |   |                       |   |        
|                     |   |                       |   |        
|                     |   |                       |   |        
|                     |   |                       |   |        
|                     |   |                       |   |        
|                     |   |                       |   |        
|                     |   |                       |   |        
|                     |   |                       |   |        
|                     |   |                       |   |        
|                     |   |                       |   |        
|                     |   |                       |   |        
|                     |   |                       |   |        
|                     |   |                       |   |        
|                     |   |                       |   |        
|                     |   |                       |   |        
|                     |   |                       |   |        
|                     |   |                       |   |        
|                     |   |                       |   |        
|                     |   |                       |   |        

F-3

---



DAIMLERCHRYSLER AG AND SUBSIDIARIES
Consolidated Balance Sheets

|                                                                    |  |     |  | Consolidated |   | Industrial
Business1 |   | Financial
Services1,2
|------------------------------------------------------------------- |  | --- |  | ------------ | - | -------------------- | - | ---------------------
|
|
|                                                                    |  |     |  |             
|Assets                                                              |  |     |  |              |   |                      |   |                      
|                                                                    |  |     |  |             
|Goodwill                                                            |  | 12. |  | 1,881        |   | 2,003                |   | 1,822                
|                                                                    |  |     |  |             
|Other intangible assets                                             |  | 13. |  | 3,191        |   | 2,671                |   | 3,133                
|                                                                    |  |     |  |             
|Property, plant and equipment, net                                  |  | 14. |  | 36,739       |   | 34,017               |   | 36,565               
|                                                                    |  |     |  |             
|Investments and long-term financial assets                          |  | 20. |  | 6,356        |   | 7,039                |   | 6,084                
|                                                                    |  |     |  |             
|Equipment on operating leases, net                                  |  | 15. |  | 34,238       |   | 26,711               |   | 3,629                
|                                                                    |  |     |  |             
|Fixed assets                                                        |  |     |  | 82,405       |   | 72,441               |   | 51,233               
|                                                                    |  |     |  |             
|Inventories                                                         |  | 16. |  | 19,139       |   | 16,805               |   | 17,674               
|                                                                    |  |     |  |             
|Trade receivables                                                   |  | 17. |  | 7,595        |   | 7,001                |   | 7,348                
|                                                                    |  |     |  |             
|Receivables from financial services                                 |  | 18. |  | 61,101       |   | 56,785               |   |                     
|                                                                    |  |     |  |             
|Other assets                                                        |  | 19. |  | 8,731        |   | 12,931               |   | 4,654                
|                                                                    |  |     |  |             
|Securities                                                          |  | 20. |  | 4,936        |   | 3,884                |   | 4,502                
|                                                                    |  |     |  |             
|Cash and cash equivalents                                           |  | 21. |  | 7,711        |   | 7,782                |   | 6,894                
|                                                                    |  |     |  |             
|Non-fixed assets                                                    |  |     |  | 109,213      |   | 105,188              |   | 41,072               
|                                                                    |  |     |  |             
|Deferred taxes                                                      |  | 9.  |  | 7,249        |   | 4,213                |   | 7,060                
|                                                                    |  |     |  |             
|Prepaid expenses                                                    |  | 22. |  | 1,391        |   | 1,030                |   | 1,299                
|                                                                    |  |     |  |             
|Disposal group Off-Highway, assets held for sale                    |  | 10. |  | 1,374        |   |                     |   | 1,374                
|                                                                    |  |     |  |             
|Total assets (thereof short-term 2005: €74,909;
2004: €68,679)      |  |     |  | 201,632      |   | 182,872              |   | 102,038              
|                                                                    |  |     |  |             
|Liabilities and stockholders' equity                                |  |     |  |              |   |                      |   |                      
|                                                                    |  |     |  |             
|Capital stock                                                       |  |     |  | 2,647        |   | 2,633                |   |                      
|                                                                    |  |     |  |             
|Additional paid-in capital                                          |  |     |  | 8,221        |   | 8,042                |   |                      
|                                                                    |  |     |  |             
|Retained earnings                                                   |  |     |  | 31,688       |   | 30,361               |   |                      
|                                                                    |  |     |  |             
|Accumulated other comprehensive loss                                |  |     |  | (6,107       | ) | (7,514               | ) |                      
|                                                                    |  |     |  |             
|Treasury stock                                                      |  |     |  |             |   |                     |   |                      
|                                                                    |  |     |  |             
|Stockholders' equity                                                |  | 23. |  | 36,449       |   | 33,522               |   | 26,859               
|                                                                    |  |     |  |             
|Minority interests                                                  |  |     |  | 653          |   | 909                  |   | 614                  
|                                                                    |  |     |  |             
|Accrued liabilities                                                 |  | 25. |  | 46,682       |   | 41,938               |   | 45,389               
|                                                                    |  |     |  |             
|Financial liabilities                                               |  | 26. |  | 80,932       |   | 76,270               |   | 4,146                
|                                                                    |  |     |  |             
|Trade liabilities                                                   |  | 27. |  | 14,591       |   | 12,920               |   | 14,381               
|                                                                    |  |     |  |             
|Other liabilities                                                   |  | 28. |  | 9,053        |   | 8,745                |   | 6,561                
|                                                                    |  |     |  |             
|Liabilities                                                         |  |     |  | 104,576      |   | 97,935               |   | 25,088               
|                                                                    |  |     |  |             
|Deferred taxes                                                      |  | 9.  |  | 4,203        |   | 2,312                |   | (2,309               
|                                                                    |  |     |  |             
|Deferred income                                                     |  | 29. |  | 8,298        |   | 6,256                |   | 5,626                
|                                                                    |  |     |  |             
|Disposal group Off-Highway, liabilities held for sale               |  | 10. |  | 771          |   |                     |   | 771                  
|                                                                    |  |     |  |             
|Total liabilities (thereof short-term 2005:
€86,399; 2004: €77,158) |  |     |  | 165,183      |   | 149,350              |   | 75,179               
|                                                                    |  |     |  |             
|Total liabilities and stockholders' equity                          |  |     |  | 201,632      |   | 182,872              |   | 102,038              
|                                                                    |  |     |  |             

1      Additional information about the Industrial Business and Financial Services is not required under U.S. GAAP
and is unaudited.

2      Contains the financing and leasing business of the Financial Services segment without Mobility Management
and activities of
        DaimlerChrysler Financial Services AG.

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 loss |   |      |   |        |  
|------------------------------------------- |  | ----- |  | ----- | - | ------ | - | ------------------------------------ | - | ---- | - | ------ | -
|
|                                            | 
|Balance at January 1,
2003                  |  | 2,633 |  | 7,819 |   | 30,485 |   | 465                                  |   | (74  | ) | 1,065  |  
|                                            | 
|Net income                                  |  |      |  |      |   | 448    |   |                                     |   |     |   |       |  
|Other comprehensive income (loss)           |  |      |  |      |   |       |   | (1,628                               | ) | 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 |   | 29,414 |   | (1,163                               | ) | 333  |   | 2,227  |  
|                                            | 
|Net income                                  |  |      |  |      |   | 2,466  |   |                                     |   |     |   |       |  
|Other comprehensive loss                    |  |      |  |      |   |       |   | (715                                 | ) | (206 | ) | (369   | )
|                                            | 
|Total comprehensive income                  |  |       |  |       |   |        |   |                                      |   |      |   |        |  
|                                            | 
|Stock based compensation                    |  |      |  | 127   |   |       |   |                                     |   |     |   |       |  
|Purchase of capital stock                   |  |      |  |      |   |       |   |                                     |   |     |   |       |  
|Re-issuance of treasury stock               |  |      |  |      |   |       |   |                                     |   |     |   |       |  
|Dividends                                   |  |      |  |      |   | (1,519 | ) |                                     |   |     |   |       |  
|                                            | 
|Balance at December 31, 2004                |  | 2,633 |  | 8,042 |   | 30,361 |   | (1,878                               | ) | 127  |   | 1,858  |  
|                                            | 
|Net income                                  |  |      |  |      |   | 2,846  |   |                                     |   |     |   |       |  
|Other comprehensive income (loss)           |  |      |  |      |   |       |   | 2,727                                |   | (18  | ) | (1,223 | )
|                                            | 
|Total comprehensive income                  |  |       |  |       |   |        |   |                                      |   |      |   |        |  
|                                            | 
|Stock based compensation                    |  |      |  | 87    |   |       |   |                                     |   |     |   |       |  
|Issuance of new shares                      |  | 14    |  | 141   |   |       |   |                                     |   |     |   |       |  
|Purchase of capital stock                   |  |      |  |      |   |       |   |                                     |   |     |   |       |  
|Re-issuance of treasury stock               |  |      |  |      |   |       |   |                                     |   |     |   |       |  
|Dividends                                   |  |      |  |      |   | (1,519 | ) |                                     |   |     |   |       |  
|Other                                       |  |      |  | (49   | ) |       |   |                                     |   |     |   |       |  
|                                            | 
|Balance at December 31, 2005                |  | 2,647 |  | 8,221 |   | 31,688 |   | 849                                  |   | 109  |   | 635    |  
|                                            | 

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 of €)

2005

2004

2003Net income (loss)

2,846

2,466

448Income (loss) applicable to minority interests

74

(108
)
35Cumulative effects of changes in accounting principles

5



30Gains on disposals of shares in companies

(732
)
(281
)
(956
)Impairment of investment in EADS





1,960Depreciation and amortization of equipment on operating leases

6,341

5,445

5,579Depreciation and amortization of fixed assets

6,312

5,817

5,838Change in deferred taxes

(809
)
(593
)
644Equity (income) loss from equity method investments

(103
)
933

538Change in financial instruments

298

(275
)
160(Gains) losses on disposals of fixed assets/securities

(1,370
)
(520
)
(424
)Change in trading securities

(4
)
(26
)
71Change in accrued liabilities

170

1,344

1,015Turnaround plan expenses (gains)  Chrysler Group

(36
)
145

469Turnaround plan payments  Chrysler Group

(92
)
(219
)
(279
)Net changes in inventory-related receivables from financial services

(207
)
(2,455
)
(2,670
)Changes in other operating assets and liabilities: Inventories, net

(1,519
)
(1,393
)
(293
) Trade receivables

(443
)
242

(441
) Trade liabilities

802

1,186

1,081 Other assets and liabilities

820

(648
)
1,021Cash provided by operating activities

12,353

11,060

13,826Purchases of fixed assets: Increase in equipment on operating leases

(20,236
)
(17,678
)
(15,604
) Purchases of property, plant and equipment

(6,580
)
(6,386
)
(6,614
) Purchases of other fixed assets

(272
)
(514
)
(303
)Proceeds from disposals of equipment on operating leases

11,643

10,468

11,951Proceeds from disposals of fixed assets

1,098

741

643Payments for investments in businesses

(552
)
(264
)
(1,021
)Proceeds from disposals of businesses

516

1,218

1,209Investments in/collections from wholesale receivables

(5,195
)
(5,978
)
(10,432
)Proceeds from sale of wholesale receivables

5,288

6,331

10,260Investments in retail receivables

(27,073
)
(30,488
)
(28,946
)Collections on retail receivables

21,262

17,148

16,577Proceeds from sale of retail receivables

8,612

9,531

9,196Acquisitions of securities (other than trading)

(10,773
)
(4,211
)
(5,175
)Proceeds from sales of securities (other than trading)

11,025

3,481

4,785Change in other cash

15

(81
)
(134
)Cash used for investing activities

(11,222
)
(16,682
)
(13,608
)Change in commercial paper borrowings and short-term financial liabilities

1,407

2,453

129Additions to long-term financial liabilities

14,322

15,013

16,436Repayment of long-term financial liabilities

(15,867
)
(13,370
)
(12,518
)Dividends paid (including profit transferred from subsidiaries)

(1,575
)
(1,547
)
(1,537
)Proceeds from issuance of capital stock (including minority interests)

227

30

44Purchase of treasury stock

(27
)
(30
)
(36
)Cash provided by (used for) financing activities

(1,513
)
2,549

2,518Effect of foreign exchange rate changes on cash and cash equivalents (maturing within 3 months)

620

(313
)
(1,069
)Net increase (decrease) in cash and cash equivalents (maturing within 3 months)

238

(3,386
)
1,667Cash and cash equivalents (maturing within 3 months)At beginning of period

7,381

10,767

9,100At end of period

7,619

7,381

10,767


The accompanying notes are an integral part of these Consolidated Financial Statements.

F-6

---



Industrial Business1

Financial Services1,2Year ended December 31,

Year ended December 31,(in millions of €)2005

2004

2003

2005

2004

20031,824

1,279

(568
)
1,022

1,187

1,016

Net income (loss)63

(113
)
30

11

5

5

Income (loss) applicable to minority interests5



30







Cumulative effects of changes in accounting principles(732
)
(281
)
(956
)






Gains on disposals of shares in companies



1,960







Impairment of investment in EADS667

544

609

5,674

4,901

4,970

Depreciation and amortization of equipment on operating leases6,251

5,693

5,735

61

124

103

Depreciation and amortization of fixed assets(356
)
(1,211
)
194

(453
)
618

450

Change in deferred taxes(92
)
951

539

(11
)
(18
)
(1
)
Equity (income) loss from equity method investments297

(288
)
141

1

13

19

Change in financial instruments(1,320
)
(524
)
(424
)
(50
)
4



(Gains) losses on disposals of fixed assets/securities(3
)
(29
)
82

(1
)
3

(11
)
Change in trading securities93

1,198

1,098

77

146

(83
)
Change in accrued liabilities(36
)
145

469







Turnaround plan expenses (gains)  Chrysler Group(92
)
(219
)
(279
)






Turnaround plan payments  Chrysler Group(207
)
(2,455
)
(2,670
)






Net changes in inventory-related receivables from financial servicesChanges in other operating assets and liabilities:(1,518
)
(1,535
)
(502
)
(1
)
142

209

 Inventories, net(419
)
210

(500
)
(24
)
32

59

 Trade receivables806

1,193

1,082

(4
)
(7
)
(1
)
 Trade liabilities989

(805
)
715

(169
)
157

306

 Other assets and liabilities6,220

3,753

6,785

6,133

7,307

7,041

Cash provided by operating activitiesPurchases of fixed assets:(4,181
)
(3,828
)
(3,973
)
(16,055
)
(13,850
)
(11,631
)
 Increase in equipment on operating leases(6,537
)
(6,298
)
(6,539
)
(43
)
(88
)
(75
)
 Purchases of property, plant and equipment(253
)
(496
)
(250
)
(19
)
(18
)
(53
)
 Purchases of other fixed assets4,996

4,514

4,577

6,647

5,954

7,374

Proceeds from disposals of equipment on operating leases1,066

705

606

32

36

37

Proceeds from disposals of fixed assets(566
)
(244
)
(967
)
14

(20
)
(54
)
Payments for investments in businesses186

1,176

1,179

330

42

30

Proceeds from disposals of businesses26,963

29,911

37,346

(32,158
)
(35,889
)
(47,778
)
Investments in/collections from wholesale receivables(27,246
)
(27,849
)
(34,938
)
32,534

34,180

45,198

Proceeds from sale of wholesale receivables3,818

4,457

3,829

(30,891
)
(34,945
)
(32,775
)
Investments in retail receivables(2,824
)
(3,848
)
(3,206
)
24,086

20,996

19,783

Collections on retail receivables(504
)
(115
)
(361
)
9,116

9,646

9,557

Proceeds from sale of retail receivables(10,773
)
(4,210
)
(4,963
)


(1
)
(212
)
Acquisitions of securities (other than trading)11,017

3,445

4,687

8

36

98

Proceeds from sales of securities (other than trading)75

(189
)
(207
)
(60
)
108

73

Change in other cash(4,763
)
(2,869
)
(3,180
)
(6,459
)
(13,813
)
(10,428
)
Cash used for investing activities848

1,481

(1,392
)
559

972

1,521

Change in commercial paper borrowings and short-term financial liabilities2,297

2,661

5,469

12,025

12,352

10,967

Additions to long-term financial liabilities(4,609
)
(6,953
)
(4,229
)
(11,258
)
(6,417
)
(8,289
)
Repayment of long-term financial liabilities(287
)
(585
)
(908
)
(1,288
)
(962
)
(629
)
Dividends paid (including profit transferred from subsidiaries)195

(255
)
(220
)
32

285

264

Proceeds from issuance of capital stock (including minority interests)(27
)
(30
)
(36
)






Purchase of treasury stock(1,583
)
(3,681
)
(1,316
)
70

6,230

3,834

Cash provided by (used for) financing activities548

(291
)
(981
)
72

(22
)
(88
)
Effect of foreign exchange rate changes on cash and cash equivalents (maturing within 3 months)422

(3,088
)
1,308

(184
)
(298
)
359

Net increase (decrease) in cash and cash equivalents (maturing within 3 months)Cash and cash equivalents (maturing within 3 months)6,381

9,469

8,161

1,000

1,298

939

At beginning of period6,803

6,381

9,469

816

1,000

1,298

At end of period


F-7

---



DAIMLERCHRYSLER AG AND SUBSIDIARIES

Consolidated Fixed Assets Schedule

Acquisition or Manufacturing Costs(in millions of €)

Balance at
January 1,
2005

Currency
change

Change in
consolidated
companies

Additions

Reclassi-
fications

Disposals

Balance at
December 31,
2005Goodwill

3,049

361

16

176



520

3,082Other intangible assets

3,477

417



274

169

205

4,132Intangible assets

6,526

778

16

450

169

725

7,214Land, leasehold improvements and buildings including buildings on land owned by others

20,995

1,145

(15
)
270

377

393

22,379Technical equipment and machinery

32,536

2,766

4

847

1,976

1,854

36,275Other equipment, factory and office equipment

22,797

2,242

5

1,502

1,517

1.856

26,207Advance payments relating to plant and equipment and construction in progress

4,268

494

16

4,002

(4,053
)
47

4,680Property, plant and equipment

80,596

6,647

10

6,621

(183
)
4,150

89,541Investments in affiliated companies

1,026

17

(161
)
165

9

126

930Loans to affiliated companies

247



(108
)
47



48

138Investments in associated companies

4,334

15

21

140

(14
)
513

3,983Investments in related companies

1,033

8

(22
)
312

5

568

768Loans to associated and related companies

242

10



11



190

73Long-term securities

611

29



147



180

607Other loans

258



(4
)
15

201

244

226Investments and long-term financial assets

7,751

79

(274
)
837

201

1,869

6,725Equipment on operating leases

35,080

4,425

275

20,236

(187
)
14,933

44,896


1      Currency translation changes with period end rates.

The consolidated fixed assets schedule is part of the Notes to Consolidated Financial Statements.

F-8

---



Depreciation/Amortization

Book Value1Balance at
January
1, 2005

Currency
change

Change in
consoli-
dated
companies

Additions

Reclassi-
fications

Disposals

Balance at
December
31, 2005

Balance at
December
31, 2005

Balance
at December
31, 2004

(in millions of €)1,046

130



30



5

1,201

1,881

2,003

Goodwill806

57

(5
)
201

2

120

941

3,191

2,671

Other intangible assets1,852

187

(5
)
231

2

125

2,142

5,072

4,674

Intangible assets9,570

465

9

671

(7
)
207

10,501

11,878

11,425

Land, leasehold improvements and buildings including buildings on land owned by others21,436

1,596

(3
)
3,005

(9
)
1,697

24,328

11,947

11,100

Technical equipment and machinery15,497

1,448

3

2,351

57

1,484

17,872

8,335

7,300

Other equipment, factory and office equipment76

15



12

(2
)


101

4,579

4,192

Advance payments relating to plant and equipment and construction in progress46,579

3,524

9

6,039

39

3,388

52,802

36,739

34,017

Property, plant and equipment211

1

(8
)
32



72

164

766

815

Investments in affiliated companies10



(6
)
2





6

132

237

Loans to affiliated companies(2
)
5

7







10

3,973

4,336

Investments in associated companies253



(17
)
4



60

180

588

780

Investments in related companies164





1



164

1

72

78

Loans to associated and related companies12









11

1

606

599

Long-term securities64



(4
)
3



56

7

219

194

Other loans712

6

(28
)
42



363

369

6,356

7,039

Investments and long-term financial assets8,369

1,035

56

6,341

(41
)
5,102

10,658

34,238

26,711

Equipment on operating leases


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 are presented in millions of euros
("€").

Certain
amounts reported in previous years have been reclassified to conform to the 2005 presentation. In connection with an internal investigation of certain accounts, transactions and
payments, DaimlerChrysler made adjustments to its January 1, 2003 stockholders' equity balance to correct for misstatements in years prior to 2003 and recognized charges in its 2005
consolidated financial income statement to correct for misstatements in the years 2003 and 2004 (see Note 31). DaimlerChrysler also adjusted its January 1, 2003 stockholders' equity
balance and recognized charges in its 2005 income relating to the years 2003 and 2004 to correct the accounting for certain derivative instruments that did not qualify for hedge accounting treatment,
deferred income taxes of its U.S. subsidiaries, and other minor misstatements. The charges recognized for 2003 and 2004 had the effect of reducing operating profit by
€55 million, financial income by €58 million, tax expense by €7 million, and 2005 net income by
€106 million in the 2005 statement of income. The total adjustments relating to the years prior to 2003 had the effect of increasing stockholders' equity as of January 1,
2003 by €72 million. The 2003 and 2004 misstatements were not material to those years and the charges recognized in 2005 to correct the misstatements of those years were not
material to the consolidated statement of income for 2005. In addition, the adjustments to January 1, 2003 stockholders' equity to correct
the cumulative misstatements as of that date were not material to beginning stockholders' equity as of January 1, 2003.

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
results of operations and financial position 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 results of operations and financial position of the Group's industrial or financial services business activities. Information concerning the financial
services business activities of the Group contains the financing and leasing business of the Financial Services segment without Mobility Management and the activities of DaimlerChrysler Financial
Services AG. 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.

F-10

---



Risks and uncertainties.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, adverse changes in global economic conditions; overcapacity and intense competition in the automotive industry; dependence on suppliers of parts and services, primarily single source suppliers;
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, interest rates and commodity prices; 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 for which DaimlerChrysler is determined to be the primary beneficiary (see Note 2).

All
significant intercompany accounts and transactions relating to consolidated subsidiaries and consolidated variable interest entities have been eliminated.

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") are accounted for using the equity method.

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") which is not amortized.

A
decline in fair value of an investment in any associated company below its carrying amount that is deemed to be other than temporary results in a reduction in carrying amount of the
investment to fair value. The impairment is charged to earnings and a new cost basis for the investment is established.

The
European Aeronautic Defence and Space Company EADS N.V. ("EADS") represents a significant associated company. Because the financial statements of EADS 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 this associated company are included in DaimlerChrysler's
consolidated financial statements on a three month lag.

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 loss. The statements of income
and the statements of cash flows are translated using average exchange rates during the respective periods.

The
exchange rates of the U.S. dollar, as the significant foreign currency, used in preparation of the consolidated financial statements were as follows:

|                              |  |                |  | 2005   |  | 2004   |  | 2003  
|----------------------------- |  | -------------- |  | ------ |  | ------ |  | ------
|
|Exchange rate at December 31, |  | 1.1797         |  | 1.3621 |  | 1.2630
|Average exchange rates        |  | First Quarter  |  | 1.3113 |  | 1.2497 |  | 1.0735
|                              |  | Second Quarter |  | 1.2594 |  | 1.2046 |  | 1.1355
|                              |  | Third Quarter  |  | 1.2199 |  | 1.2218 |  | 1.1248
|                              |  | Fourth Quarter |  | 1.1897 |  | 1.2977 |  | 1.1885

F-11

---



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. In all periods presented the Group had foreign operations in one economy that was considered highly inflationary.

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 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
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 current period if the sum of expected costs for services under the contract exceeds unearned revenue.

For
transactions with multiple deliverables, such as when vehicles are sold with free service programs, the Group allocates revenue to the various elements based on their relative fair
values when criteria for separation are met.

When
below market rate loans under special financing programs are used to promote sales of vehicles and the Financial Services segment finances the vehicle, the effect of the rate
differential at the contract origination date is deducted from revenues and recorded as unearned income in the consolidated balance sheet. The Financial Services segment 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, such as in sales to certain rental car company customers, are accounted for similar to an operating lease
in accordance with Emerging Issues Task Force ("EITF") 95-1, "Revenue Recognition on Sales with a Guaranteed Minimum Resale Value." The guarantee of the resale value may take the form of
an obligation by DaimlerChrysler to pay any deficiency between the proceeds the customer receives upon resale in an auction and the guaranteed amount or an obligation to reacquire the vehicle after a
certain period of time at a set price. Gains or losses from resale of these vehicles are included in gross profit.

Revenue
from operating leases is recognized on a straight-line basis over the lease term.

F-12

---



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.

Sales of receivables.The Group transfers significant amounts of automotive finance receivables in the ordinary course of business to
trusts in "asset-backed securitizations" and "whole loan sales" and usually remains as servicer for a servicing fee. The accounting for securitized sold receivables is based upon the financial
component approach that focuses on control according to the provisions of Statement of Financial Accounting Standards ("SFAS") 140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities."

Servicing
fees are recognized on a consistent yield basis over the remaining term of the related receivables sold.

Gains
and losses from the sale of finance receivables are recognized as revenues 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.

Further
information on the Group's securitized sold receivables is included in Note 34.

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 the underlying collateral. Credit
exposures deemed to be uncollectible are charged against the allowance for doubtful accounts. DaimlerChrysler generally does not originate or purchase receivables for resale. Loans that are classified
as held for sale are carried at the lower of cost or market when it is determined that market price for the loan represent the estimated future cash flows on the loan.

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") and DaimlerChrysler's share of any dilution gains and losses reported by its investees accounted for under the equity method
are recognized in the Group's consolidated statement of income in the line item "Other financial income (expense), net."

Income taxes.Current income taxes are determined based on respective local taxable income and tax rules. In addition, current income
taxes include adjustments for uncertain tax payments or tax refunds for periods not yet assessed. Deferred tax reflects the changes in deferred tax assets and liabilities except for changes recognized
in other comprehensive loss. Deferred tax assets or liabilities are determined based on temporary differences between financial reporting and the tax basis of assets and liabilities including
differences from consolidation, loss carry forwards and tax credits. Amortization of these differences or realization of loss carry forwards and tax credits are based on enacted local tax rules and
tax rates. DaimlerChrysler recognizes a valuation allowance on deferred tax assets if it is more likely than not that the benefit from the deferred tax asset will not be realized.

F-13

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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 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. Net assets of a discontinued Group component classified as held for sale are measured at the lower of its carrying amount or fair value less
cost to sell. Gains from the sale of a discontinued Group component are recognized in the period realized and reported separately.

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
differences between actual and expected return on plan assets 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
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).

DaimlerChrysler
elected retroactive application as of January 1, 2004, to account for subsidies provided under the Medicare Prescription Drug, Improvement and Modernization Act of
2003 ("Medicare Act"). Under certain conditions, the Medicare Act provides for subsidies related to postretirement healthcare benefits that reduce the accumulated postretirement benefit obligation
("APBO") of companies in the United States. See Note 25a for further information about the impact of the Medicare Act on the Group's consolidated financial statements.

Earnings Per Share.Basic earnings per share are calculated by dividing income from continuing operations and net income, respectively, by
the weighted average number of shares outstanding. Diluted earnings per share reflect the potential dilution that would occur if all securities and other contracts to issue ordinary shares were
exercised or converted (see Note 36).

F-14

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Goodwill and Other Intangible Assets.The Group accounts for all business combinations initiated after
June 30, 2001, using the purchase method of accounting. Goodwill represents the excess of the cost of an acquired entity over the fair values assigned to the assets acquired and the liabilities
assumed after taking into consideration the types of acquired intangible assets that are required to be recognized and reported separately from goodwill.

Goodwill
acquired and intangible assets determined to have an indefinite useful life are not amortized, but instead are tested for impairment. 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 until its life is determined to no longer be indefinite. Intangible assets with estimable useful lives are valued at
acquisition cost, are amortized on a straight-line basis over their respective estimated useful lives (2 to 10 years) to their estimated residual values, and are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount of the asset or asset group may not be recoverable.

Property, Plant and Equipment.Property, plant and equipment is valued at acquisition or manufacturing costs plus the fair value of
related asset retirement costs, if any and if reasonably estimable, less accumulated depreciation. Plant and equipment under capital leases are stated at the lower of present value of minimum lease
payments or fair value less accumulated amortization. Depreciation expense is recognized using the straight-line method. The costs of internally produced equipment and facilities include
all direct costs and allocable manufacturing overhead including depreciation charges as well as the fair value of related asset retirement cost, if any. 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 yearsSite improvements

5 to 40 yearsTechnical equipment and machinery

3 to 30 yearsOther equipment, factory and office equipment

2 to 33 years


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 expense on operating lease 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.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.

F-15

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Assets and liabilities held for sale.Long-lived assets and disposal groups classified as held for sale (including
discontinued operations) are disclosed separately. Long-lived assets held for sale
are reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. See Notes 4 and 10 for further information.

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 fair value 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 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 or cost method investment below cost that is deemed to be other than temporary results
in an impairment charge to earnings that reduces the carrying amount of the security or the cost method investment to fair value establishing a new cost basis.

Valuation of Retained Interests in Securitized Sold Receivables.DaimlerChrysler retains residual beneficial interests in certain pools of
sold and securitized retail and wholesale finance receivables. The retained interest balance represents DaimlerChrysler's right to receive collections on the transferred receivables in excess of
amounts required by the securitization trust to pay the interest and principal to investors, servicing fees, and other required payments. 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
securitized sold receivables, expected future credit losses arising from the collection of the securitized sold receivables, and estimated repayment of principal and interest on notes issued to third
parties and secured by the sold receivables.

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 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.

F-16

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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 those 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 accrued 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 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 loss 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 33.

Commitments and Contingencies.Liabilities for loss contingencies are recorded when it is probable that a liability to third parties has
been incurred and the amount can be reasonably estimated. Liabilities for loss contingencies are regularly adjusted as further information develops or circumstances change.

The
accrued liability for 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.

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 recent actual experience.

In
accordance with Financial Accounting Standards Board ("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" DaimlerChrysler recognizes, 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. DaimlerChrysler applies these provisions for
guarantees issued or modified after December 31, 2002. If performance under the guarantee is probable and the amount can be reasonably estimated, a liability for the contingent obligation is
recognized for any guarantee regardless of its date of issuance. Further information on the Group's obligations under guarantees is included in Note 25b and 32.

F-17

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DaimlerChrysler
records the fair value of an asset retirement obligation in the period in which it incurs a legal obligation associated with the retirement of tangible
long-lived assets and subsequently adjusts the carrying amount for changes in expected cash flows and the passage of time.

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.

Stock-Based Compensation.DaimlerChrysler adopted the fair value recognition provisions of SFAS 123, "Accounting for Stock-Based
Compensation," prospectively to all employee awards granted, modified, or settled after January 1, 2003. Compensation expense for all stock-options granted after December 31, 2002, has
been measured principally at the grant date based on the fair value of the equity award using a modified Black-Scholes option-pricing model. Compensation expense is recognized over the employee
service period with an offsetting credit to equity (paid-in capital). DaimlerChrysler options granted prior to January 1, 2003, 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 following table illustrates the
effect on net income and earnings 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                                                                                                                                  |  | 2,846                   |  
|Add: Stock-based employee compensation expense included in reported net income, net of related tax effects                                  |  | 57                      |  
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects |  | (59                     | )
|                                                                                                                                            |  |                         |  
|Pro forma net income                                                                                                                        |  | 2,844                   |  
|                                                                                                                                            |  |                         |  
|Earnings per share (in €):                                                                                                                  |  |                         |  
|Basic                                                                                                                                       |  | 2.80                    |  
|Basic  pro forma                                                                                                                           |  | 2.80                    |  
|Diluted                                                                                                                                     |  | 2.80                    |  
|Diluted  pro forma                                                                                                                         |  | 2.79                    |  

Further
information on stock-based compensation is included in Note 24.

New Accounting Standards Not Yet Adopted.In December 2004 the FASB issued SFAS 123 (revised 2004), "Share-Based Payment"
("SFAS 123R"). SFAS 123R establishes the accounting for transactions in which an entity exchanges its equity instruments for goods or services. SFAS 123R also addresses
transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those
equity instruments. Equity-classified awards are measured at grant date fair value and are not subsequently remeasured. Liability-classified awards are remeasured to fair value at each balance sheet
date until the award is settled. SFAS 123R originally applied to all awards granted after July 1, 2005, and to awards modified, repurchased or cancelled after that date. The effective
date of SFAS 123R was deferred by an SEC Rule until the beginning of the first annual period beginning after June 15, 2005. DaimlerChrysler will adopt SFAS 123R as of
January 1, 2006, using a modified version of

F-18

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prospective
application. DaimlerChrysler expects the cumulative effect from the adoption of SFAS 123R to increase expense by €9 million in the first quarter of 2006.

In
June 2005 the FASB ratified EITF 05-5, "Accounting for Early Retirement or Postemployment Programs with Specific Features (Such As Terms Specified in Altersteilzeit
Early Retirement Arrangements)." EITF 05-5 provides guidance on the accounting for the German Altersteilzeit ("ATZ") early retirement program and other types of benefit arrangements with
the same or similar terms. The ATZ program is an early retirement program in Germany designed to create an incentive for employees within a certain age group, to transition from full or
part-time employment into retirement before their legal retirement age. The ATZ program provides the employee with a bonus which is reimbursed by subsidies from the German government if
certain conditions are met. According to EITF 05-5, the bonuses provided by the employer should be accounted for as postemployment benefits under SFAS 112, "Employer's Accounting
for Postretirement Benefits," with compensation cost recognized over the remaining service period beginning when the individual agreement is signed by the employee and ending when the active service
period ends. The government subsidy should be recognized when the employer meets the necessary criteria and is entitled to the subsidy. The effect of applying EITF 05-5 should be
recognized prospectively as a change in accounting estimate in fiscal years beginning after December 15, 2005. DaimlerChrysler expects the adoption of EITF 05-5 to result in income
after taxes of approximately €0.1 billion from the reduction of the related provision that will be recognized in the income of the first quarter 2006 in the Group's consolidated
financial statements.

2. Scope of Consolidation and Certain Variable Interest Entities

Scope of Consolidation.DaimlerChrysler comprises, besides DaimlerChrysler AG, 494 (2004: 485) German and
non-German subsidiaries as well as 4 (2004: 4) companies (variable interest entities) that have been consolidated in accordance with the requirements of FASB Interpretation
No. 46 (revised December 2003) "Consolidation of Variable Interest Entities ("FIN 46R")". A total of 96 (2004: 105) companies are accounted for in the consolidated financial statements using
the equity method of accounting. During 2005, 18 subsidiaries were included in the consolidated financial statements for the first time. A total of 9 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, if material, are explained further in the notes to the consolidated
financial statements. In addition, 3 (2004: 3) companies administering pension funds whose assets are subject to restrictions have not been included in the consolidated financial statements.
The impact of non-consolidated subsidiaries (affiliated companies) and investments that were not accounted for using the equity method of accounting (associated companies) on the
consolidated financial position, results of operations or cash flows of the Group was neither material for individual companies nor in the aggregate.

Variable Interest Entities.DaimlerChrysler applied the provisions FIN 46R to special purpose entities as of December 31, 2003, and
to all other entities as of March 31, 2004. The implementation of FIN 46R resulted in the consolidation of 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 them effective December 31, 2003. Under the
leasing arrangements, variable interest entities were established which 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 of those consolidated entities amount to €0.5 billion and
€0.7 billion and total liabilities amount to €0.7 billion and €0.8 billion as of December 31, 2005 and 2004, respectively.
The cumulative effect of consolidating these special purpose entities on the Group's consolidated statement of income in 2003 was €(30) million, net of taxes of
€35 million (€(0.03) per share). The assets consist primarily of property, plant and

F-19

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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.

In
addition, DaimlerChrysler has equity or other variable interests in a number of other variable interest entities where it is not the primary beneficiary. Among these entities are Toll
Collect, multi-seller bank conduits, and other variable interest entities. Note 3 provides disclosure about the Group's involvement in Toll Collect, while multi-seller bank conduits are
discussed in Note 34. DaimlerChrysler's aggregate maximum exposure to loss arising from its investments in the other variable interest entities was €0.4 billion as of
December 31, 2005.

3. Significant Equity Method Investments

EADS.At December 31, 2005, the European Aeronautic Defence and Space Company EADS N.V. ("EADS") was the
most significant investment accounted for under the equity method. The Group's legal ownership percentage in EADS as of December 31, 2005, was 30%.

On
July 7, 2004, DaimlerChrysler entered into a securities lending agreement with Deutsche Bank AG concerning 22,227,478 EADS shares (3% of the voting stock). The securities
lending has several tranches with terms ranging between three and four years. As collateral, DaimlerChrysler received a lien on a securities account of equivalent value as the shares loaned by
DaimlerChrysler. Because this transaction does not meet the criteria of a sale, the loaned shares continue to be carried as investments on the balance sheet and, accordingly, our proportionate share
of EADS' income is still accounted at a percentage of 33%.

As
of September 30, 2003, DaimlerChrysler determined that the decline in fair value below the carrying value of its investment in EADS was other than temporary. To evaluate the
fair value of the investment the Group used the market price of a share of EADS common stock, multiplied by the number of shares owned. In making that determination, DaimlerChrysler considered the
duration and severity of the decline and the reasons for the decline. Although EADS is involved in a variety of businesses, it is primarily an aircraft manufacturer because of its Airbus division,
which manufactures commercial aircraft and represents more than 60% of EADS' revenues. As a consequence, EADS' share price declined as a result of the negative outlook for the airline industry in the
aftermath of the terrorist attacks at September 11, 2001, the outbreak of the SARS disease, the war in Iraq and the decline of the U.S. dollar compared to the euro which further depressed
market participants' expectations for the commercial airline industry. Consequently, DaimlerChrysler reduced the carrying value of its investment in EADS by €1.96 billion to its
market value, based on the quoted market price, which approximated €3.5 billion at that time. As a result of the impairment a new cost basis was established.

DaimlerChrysler's
equity in the earnings or losses of EADS was €324 million, €249 million and €(1,845) million in 2005, 2004
and 2003, respectively, including investor-level adjustments. DaimlerChrysler's equity in the earnings or losses of EADS is shown in the Group's statements of income within "Financial income
(expense), net," except for the other than temporary impairment of €1,960 million in 2003, which is included in a separate caption within "financial income (expense), net."

The
carrying amount of DaimlerChrysler's investment in EADS at December 31, 2005 and 2004 was €3,564 million and €3,854 million,
respectively. DaimlerChrysler's share of the underlying reported net assets of EADS exceeded the carrying value of DaimlerChrysler's investment at December 31, 2005 and 2004, by
€1,899 million, primarily as a result of the impairment recognized in the third quarter of 2003. The market value at December 31, 2005, of DaimlerChrysler's investment in
EADS based on quoted market prices was €8,507 million.

F-20

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The
following table presents summarized U.S. GAAP financial information for EADS, which was the basis for applying the equity method in the Group's consolidated financial statements:

EADS



2005

2004

2003Revenues

32,542

30,977

27,650Net income

980

753

348


Balance sheet information2

Fixed assets

32,462

29,331Non-fixed assets

36,935

34,525Total assets

69,397

63,856Stockholders' equity

16,557

17,434Minority interests

1,811

1,971Accrued liabilities

10,825

9,299Other liabilities

40,204

35,152Total liabilities and stockholders' equity

69,397

63,856


---

MMC.On April 22, 2004, the Board of Management and the Supervisory Board of
DaimlerChrysler AG decided to withdraw from providing any financial support to Mitsubishi Motors Corporation ("MMC") and not to participate in a recapitalization of MMC anticipated to occur in
July 2004. At the time of this decision, DaimlerChrysler held 37% of MMC's voting stock and was represented by 3 of the 8 (37.5%) of the members of MMC's board of directors.

Between
DaimlerChrysler's Board vote on April 22, 2004, and the MMC shareholder meeting on June 29, 2004, MMC worked with its other significant shareholders, lenders and
potential investors on a restructuring plan that included a recapitalization of MMC which was presented for vote at the June 29 shareholder meeting. DaimlerChrysler was not party to those
discussions nor did DaimlerChrysler participate in any of the measures set forth in the restructuring plan; however, DaimlerChrysler's concurrence to the measures was required as its ownership level
at such time provided it with veto powers.

On
June 29, 2004, the shareholders of MMC approved the restructuring plan which resulted in a new investor obtaining a 33.3% interest in MMC's voting stock, thereby becoming MMC's
largest shareholder, and in the issuance of three classes of convertible preferred instruments to other investors and some existing MMC shareholders (not including DaimlerChrysler).

The
new investor that acquired a 33.3% voting interest entered into a contractual agreement with MMC that awarded it the unilateral right to make significant operating decisions. In
addition, the new shareholder acted in concert with other large institutional shareholders who together with the new shareholder own a majority of the voting stock. Accordingly, such Japanese
shareholder groups who acted in concert in the recapitalization were in a position to control MMC.

F-21

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The
MMC board of directors was comprised of 12 board members in total, with DaimlerChrysler's board representation reduced to 2 board members (16.7%) which did no longer enable
DaimlerChrysler to block or veto any matters coming to a vote at board level.

DaimlerChrysler's
ownership interest in voting stock was diluted from 37.0% to 24.7% in the second quarter of 2004. The dilution below one-third was significant because
Japanese laws require a one-third minimum quorum to afford shareholder protective rights, e.g. in cases of the dissolution of the company, the sale of all or substantial part of the
business of the company, or agreements to
merge with other companies. As a result, DaimlerChrysler no longer had the blocking and veto rights that DaimlerChrysler believes are essential to exercise significant influence by ownership interest.
DaimlerChrysler surrendered significant rights by agreeing not to oppose the restructuring plan. Upon conversion of the mandatory convertible preferred instruments issued to other MMC investors,
DaimlerChrysler's interest in MMC's voting stock would have been further diluted to below 11%.

Furthermore,
all executive officers appointed by DaimlerChrysler resigned and all other DaimlerChrysler expatriates, in total more than 50 managers that were assigned to this investee,
left MMC prior to June 30, 2004, and returned to DaimlerChrysler. Even prior to the June 29, 2004 shareholder meeting, an announcement was made on May 24, 2004 informing MMC
employees that DaimlerChrysler's assignees had been released from their managerial responsibilities and had delegated their responsibilities to other managers, none of whom were related to
DaimlerChrysler.

Based
on the factors outlined above, DaimlerChrysler lost its ability to significantly influence MMC's operating and financial policies. Consequently, as of the annual shareholders'
meeting of MMC on June 29, 2004, DaimlerChrysler ceased to account for its investment in MMC using the equity method and has accounted for MMC shares as a marketable security at fair value
until the disposition of such shares (see Note 20).

Through
June 29, 2004, the results from MMC were included in the Group's consolidated statements of income using the equity method of accounting. The Group's proportionate share
in the negative results of MMC through June 29, 2004 and 2003, was €(655) million and €(281) million, respectively. The amount for 2004 includes
the effects from the dilution of the Group's interest in MMC of €(135) million and related realized gains from currency hedging of the net investment of
€195 million (after tax €120 million). These effects from the dilution as well as these realized gains from currency hedging are reflected in
DaimlerChrysler's consolidated statement of income in the line item "financial income (expense), net".

In
November 2005, DaimlerChrysler sold all of its MMC shares for €970 million in cash. Due to the gain on that sale DaimlerChrysler's financial income and
net income for 2005 increased by €681 million and €502 million, respectively.

The
following table presents summarized U.S. GAAP financial information for MMC, which was the basis for applying the equity method in the Group's consolidated financial statements:

MMC



2004

2003Revenues

9,858

27,129Net loss

(1,730
)
(759
)


---

F-22

---



Toll Collect.In 2002, our subsidiary DaimlerChrysler Financial Services AG (formerly
DaimlerChrysler Services AG), Deutsche Telekom AG and Compagnie Financiere et Industrielle des Autoroutes S.A. (Cofiroute) contracted with the Federal Republic of Germany to develop and, within a
joint venture company, install and operate a system for electronic collection of tolls from all commercial vehicles over 12t GVW using German highways. DaimlerChrysler Financial Services AG and
Deutsche Telekom AG each hold a 45% equity interest and Cofiroute holds the remaining 10% equity interest in both the consortium (Toll Collect GbR) and the joint venture company (Toll Collect GmbH)
(together "Toll Collect"). DaimlerChrysler accounts for its 45% ownership interest in Toll Collect using the equity method of accounting. The Group has a significant variable interest in Toll Collect,
a variable interest entity, but determined that it is not the primary beneficiary and therefore not required to consolidate Toll Collect. In the operating agreement, each of the consortium members
(including DaimlerChrysler Financial Services AG) has provided guarantees supporting the obligations of Toll Collect
GmbH towards the Federal Republic of Germany. These guarantees are described in more detail below. Cofiroute's risks and obligations are limited to €70 million. DaimlerChrysler
Financial Services AG and Deutsche Telekom AG are jointly obliged to indemnify Cofiroute for amounts exceeding this limitation.

The
following table presents summarized U.S. GAAP financial information for Toll Collect, which was the basis for applying the equity method in the Group's consolidated financial
statements:

Toll Collect



2005

2004

2003Revenues

522



Net loss

(143
)
(1,071
)
(206
)


Balance sheet information as of December 31

Noncurrent assets

457

458Current assets

467

77Total assets

924

535Equity

(789
)
(934
)Noncurrent liabilities

38

1,173Current liabilities

1,675

296Total liabilities and equity

924

535


During the construction period of the toll collection system, the most significant assumptions used in accounting for the investment in Toll
Collect related to the launch date of the toll collection system, the estimated cost to design and construct the system, and the operation of the system.

According
to the Operating Agreement, the toll collection system was to be operational no later than August 31, 2003. After a delay in the launch date of the toll collection
system, which resulted in a loss of revenue for Toll Collect and in payments of contractual penalties for delays, the toll collection system was introduced on January 1, 2005, with
on-board units that allowed for slightly less than full technical performance in accordance with the technical specification (phase 1). On January 1, 2006, the toll collection
system was
installed and started to operate with full effectiveness as specified in the Operating Agreement (phase 2). On December 20, 2005 Toll Collect GmbH received a preliminary operating permit as
specified in the Operating Agreement. Toll Collect GmbH expects to receive a final operating permit in April 2006. Failure to obtain the final operating permit by

F-23

---



January 1,
2007, at the latest, may lead to termination of the operating agreement by the Federal Republic of Germany.

With
the successful start of phase 1, for the period beginning January 1, 2005, Toll Collect GmbH received remuneration for the infrastructure and the operation of the toll
collection system from the Federal Republic of Germany. Certain immaterial penalties have been set off from the remuneration by the Federal Republic of Germany. According to the implementation
agreement of April 23, 2004, the Federal Republic of Germany paid Toll Collect GmbH only 95% of the fees which would otherwise had been payable under the Operating Agreement due to the slightly
reduced technical functionality during phase 1.

Failure
to perform various obligations under the Operating Agreement may result in penalties, additional revenue reductions and damage claims that could become significant over time.
However, penalties and revenue reductions are capped at €75 million per year until September 30, 2006, at €150 million per year thereafter until
the final operating permit has been issued, and at €100 million per year following issuance of the final operating permit. These cap amounts are subject to a 3% increase for
every year of operation.

During
phase 1 any offsetting with claims of the Federal Republic of Germany stemming from the period before January 1, 2005, including contractual penalties and damages, was
excluded. The exclusion of offsetting according to the implementation agreement does not cover damages and contractual penalties arising with the beginning of phase 1. In phase 2 there are no
limitations to offsetting by the Federal Republic of Germany. In case of any offsetting Toll Collect GmbH insofar may not receive remuneration. In case of offsetting, the consortium members may be
required to provide Toll Collect GmbH with sufficient liquidity.

The
Operating Agreement calls for submission of all disputes related to the toll collection system to arbitration. The Federal Republic of Germany has initiated arbitration proceedings
against DaimlerChrysler Financial Services AG, Deutsche Telekom AG and the consortium. According to the statement of claims received in August 2005, the Federal Republic of Germany is seeking
damages, including contractual penalties and reimbursement of lost revenues that allegedly arose from delays in the operability of the toll collection system. See Note 31 for additional
information.

Each
of the consortium members (including DaimlerChrysler Financial Services AG) have provided guarantees supporting the obligations of Toll Collect GmbH towards the Federal Republic of
Germany relating to the completion and operation of the toll collection system, which are subject to specific triggering events. In addition, DaimlerChrysler AG has guaranteed bank loans obtained by
the consortium. The guarantees are described in detail below:



F-24

---





While
DaimlerChrysler's maximum future obligation resulting from the guarantee of the bank loan can be determined (€600 million), the Group is unable to accurately
estimate its maximum exposure to loss resulting from the guarantee of obligations and the guarantee in form of the equity maintenance undertaking due to the various uncertainties described above.
Therefore, in addition to the maximum exposure from the guarantee of the bank loan and the risks already provided for under the established accruals, the Group's exceeding maximum exposure to loss
could be material.

debis AirFinance.In November 1995, DaimlerChrysler assumed a 45% equity ownership interest in debis AirFinance B.V. ("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
held the remaining ownership interests in dAF. DaimlerChrysler held significant variable interests in dAF, a variable interest entity, but determined that it was not the primary beneficiary and
therefore not required to consolidate dAF. DaimlerChrysler's involvement with dAF consisted primarily of its equity interest and also subordinated loans receivable and unsecured loans provided to dAF.
In the fourth quarter of 2004, DaimlerChrysler recorded impairment charges of €222 million relating to its investment which were based on estimates of the fair value of
DaimlerChrysler's proportionate share of dAF's underlying equity and of the loans provided to dAF.

In
June 2005, as part of the Group's ongoing strategy to focus on its core automotive business, DaimlerChrysler sold its 45% equity interest in dAF and its outstanding
subordinated loans receivable and unsecured loans to dAF for €325 million in cash to Cerberus Capital Management, L.P., subject to indemnification for exposures incurred prior
to the sale up to a maximum of $30 million. The sale did not have a material impact on the Group's net income.

Prior
to the sale, DaimlerChrysler accounted for its investment in dAF using the equity method of accounting.

4. Acquisitions and Dispositions

Acquisitions

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 Mitsubishi Fuso Truck and Bus Corporation ("MFTBC") for €764 million in cash plus certain direct acquisition
costs. MFTBC is involved in the development, design, manufacture, assembly and sale of small, mid-size and heavy-duty trucks and buses, primarily in Japan and other Asian
countries. Also, on March 14, 2003, ten Mitsubishi Group companies 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 €266 million in cash. On March 18, 2004, DaimlerChrysler acquired from MMC an additional 22% interest in MFTBC for
€394 million in cash, thereby reducing MMC's interest in MFTBC to a non-controlling 20%. The aggregate amount paid by DaimlerChrysler for its 65% controlling
interest in MFTBC was €1,251 million, consisting of consideration paid plus direct acquisition costs in 2003 and 2004 (€770 million and
€394 million, respectively), plus a re-allocation of €87 million of the initial purchase price of MMC pertaining to MFTBC and previously
included in the Group's investment in MMC, which was an equity method investee of DaimlerChrysler when the business combination with MFTBC was consummated. DaimlerChrysler has included the
consolidated results of MFTBC beginning at the consummation date in the Group's Commercial
Vehicles segment. Prior to then, the Group's proportionate share of MFTBC's results was included in the Commercial Vehicles segment using the equity method of accounting (see also Note 35).

F-25

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Subsequent
to DaimlerChrysler's acquisition of a controlling interest in MFTBC, a number of quality problems concerning MFTBC vehicles spanning production years since July 1974
were identified. During the second and third quarters of 2004, DaimlerChrysler was able to comprehensively assess those quality issues and define necessary technical solutions and a course of action
to implement them. The estimates of cost in the interim periods of 2004 were based on the status of the investigation and DaimlerChrysler's best estimate of the probable costs to be incurred to
address and remedy the identified quality issues.

Of
the €1.1 billion quality costs recorded in 2004 by MFTBC, (i) €0.1 billion was recognized in "Financial income (expense), net" in
the statement of income representing DaimlerChrysler's proportionate share of the results of MFTBC, which was included on a one month lag relating to amounts attributed to refinements to estimates
that were made before MFTBC was fully consolidated, (ii) €0.7 billion to cost of sales representing the sum of the 43% attributed to the March 2003 investment (for
which the purchase price allocation period was closed) and the 35% of the costs attributed to minority shareholders of MFTBC; (iii) €0.2 billion to goodwill attributed to
the 22% interest acquired in 2004; and (iv) €0.1 billion to deferred tax assets.

DaimlerChrysler
assigned €95 million of the aggregate preliminary purchase price to registered trademarks that are not subject to amortization,
€81 million to technology with a useful life of 10 years, €49 million to other identifiable intangible assets and
€14 million to acquired in-process R&D that was expensed in the periods the investments were made. In addition, DaimlerChrysler assigned
€6,206 million to tangible assets acquired and €5,469 million to liabilities assumed. The remaining €275 million was allocated to
goodwill of the Commercial Vehicles segment and is not expected to be deductible for tax purposes.

During
the first quarter of 2005, MFTBC finished investigating the product quality reports and finalized its conclusions about the issues that required action. The level of information
reached during this process enabled DaimlerChrysler to refine its estimate of the probable cost and an additional amount of €5 million was recorded in the first quarter of 2005.
MFTBC expects to be able to complete the majority of the field campaigns by the end of the first quarter of 2006.

Under
the two share purchase agreements under which DaimlerChrysler acquired 43% and 22%, respectively, of MFTBC shares, DaimlerChrysler had the right to a price adjustment if the
warranty reserve recorded on the books of MFTBC proved to be inadequate. Negotiations with MMC resulted in a settlement agreement on March 4, 2005, in which the parties agreed on such a price
adjustment. Under the terms of the settlement
agreement, DaimlerChrysler received (i) MMC's remaining 20% stake in MFTBC, (ii) a cash payment of €72 million, (iii) promissory notes having an aggregate
face value of €143 million, payable in four equal installments over the next four years and (iv) certain other assets and rights pertaining to the distribution of MFTBC
products in one Asian market. The parties also clarified the terms of their cooperation under other, ongoing agreements. The fair value assigned to the consideration received from MMC was
€0.5 billion and has been allocated to income and goodwill consistent with DaimlerChrysler's accounting for the quality issues subsequent to the business combination.
Accordingly, €0.3 billion was recognized as a reduction of cost of sales in the first quarter of 2005 based on DaimlerChrysler's proportionate after-tax loss
recorded in the second and third quarter of 2004 relating to quality measures and €0.2 billion was recognized as reduction of goodwill.

As
a result of the settlement with MMC, DaimlerChrysler's controlling interest in MFTBC increased from 65% to 85% and the aggregate purchase price after giving effect to the price
reduction was €1,014 million. As of June 30, 2005, goodwill of €53 million related to final purchase price allocation of MFTBC was allocated to the
Commercial Vehicles segment. The goodwill is not expected to be deductible for tax purposes.

Dispositions

Off-Highway business.In September 2005, DaimlerChrysler acquired the 11.65% interest in MTU
Friedrichshafen GmbH ("MTU-F") held by minority shareholders for €171 million in cash, including direct

F-26

---



transaction
costs. DaimlerChrysler has subsequently owned 100% of the MTU-F shares. As a result of this transaction, DaimlerChrysler recorded a preliminary goodwill of
€134 million that was allocated to goodwill of the Other Activities segment.

On
December 27, 2005, as part of the Group's ongoing strategy to focus on its core automotive business, DaimlerChrysler entered into a share sale and purchase agreement with the
Swedish investor group EQT regarding the sale of a major portion of its Off-Highway Business Unit, including the MTU-F Group and the Off-Highway activities of
Detroit Diesel Corporation. The sale price, which still has to be determined finally, is based on an enterprise value of €1,600 million which is subject to adjustments for cash,
debts, pensions and a standardized net working capital.

The
closing of the transaction, which is expected to occur in the first quarter of 2006, is subject to certain closing conditions, e.g. approval of the relevant anti-trust
authorities. Furthermore, the transaction has to be submitted for review by the Federal Ministry of Economics and Technology under the German Foreign Trade and Payments Act (see Note 10 for
presentation).

ALF.In the third quarter of 2005, as part of the Group's ongoing strategy to focus on its core automotive business, Freightliner, a
wholly-owned U.S. subsidiary of DaimlerChrysler, entered into an agreement to sell major parts of its subsidiary American LaFrance ("ALF"), a fire-truck manufacturer, to an U.S. investment
company. The sale was closed in the fourth quarter of 2005. Prior to the sale and based upon the agreed purchase price, Freightliner recorded asset impairment charges in 2005 of
€87 million, related to the write-down of inventories and certain long-lived assets, which are reflected in cost of sales and other operating expenses of
the Commercial Vehicles segment.

Hyundai.In May 2004, as part of the realignment of its strategic alliance with Hyundai Motor Company ("HMC"), DaimlerChrysler
terminated discussions with HMC regarding the formation of a commercial vehicles joint venture. Also in May 2004, DaimlerChrysler sold its non-controlling 50% interest in
DaimlerHyundai Truck Corporation ("DHTC") to HMC for a total pretax gain of €60 million (€27 million was recognized in other income and
€33 million is recognized in financial income (expense), net), which is attributed to the Commercial Vehicles segment. In August 2004, as part of the realignment of its
strategic alliance with HMC, DaimlerChrysler sold its 10.5% stake in HMC for €737 million in cash, resulting in a pretax gain of €252 million that is
included in financial income (expense), net.

MTU Aero Engines.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 Roberts & Co. Ltd. ("KKR"), an investment company. The sales price for the
operative business of MTU Aero Engines amounted to €1,450 million. Excluding cash, cash equivalents and debts, which remain at MTU Aero Engines, the net sales price amounted to
€1,052 million. Consideration received by DaimlerChrysler included a note receivable from KKR and cash of €877 million. As a result of this transaction,
DaimlerChrysler paid a compensation of $250 million to United Technologies Corporation, the parent company of Pratt & Whitney, in January 2004. In 2003, DaimlerChrysler realized a
gain of €882 million from this sale, net of taxes of €149 million. 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).

Other dispositions.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 €42 million in cash. DaimlerChrysler's remaining 40% interest in
Mercedes-Benz Lenkungen GmbH was subject to put and call options held by DaimlerChrysler and ThyssenKrupp, respectively, of approximately €28 million. The sales
resulted in an

F-27

---



aggregate
pretax gain of €11 million in 2003, which is included in other income of the Commercial Vehicles segment. DaimlerChrysler's remaining 40% interest in
Mercedes-Benz Lenkungen GmbH was accounted for using the equity method. In November 2005, the Group exercised its Put Option to sell its remaining 40%-stake in ThyssenKrupp Presta
SteerTec (formerly: Mercedes-Benz Lenkungen GmbH) to ThyssenKrupp for a purchase price of €28 million.

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 €55 million in cash, resulting in a pretax gain of €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.

Notes to Consolidated Statments of Income

5. Functional Costs and Other Expenses

Selling, administrative and other expenses are comprised of the following:

Year ended December 31,(in millions of €)

2005

2004

2003Selling expenses

11,960

11,403

11,763Administration expenses

6,092

6,008

5,351Other expenses

932

561

65818,984

17,972

17,772


In
2005, selling expenses include advertising costs of €2,512 million (2004: €2,748 million, 2003: €2,965 million).

Headcount reduction initiative at Mercedes Car Group.In September 2005, DaimlerChrysler
initiated a program to enhance the competitiveness of the Mercedes Car Group. The program is expected to reduce headcount by 8,500 employees in Germany, primarily through voluntary termination
contracts. The initiative is expected to be finalized during the second half of 2006. The individual benefits are based on age, salary levels and past service.

As
of December 31, 2005, approximately 5,000 employees have signed severance contracts. For the contracts signed prior to December 31, 2005, expenditures of
€670 million will be incurred; €570 million were recorded in income for 2005, primarily within cost of sales. An amount of
€100 million is available under the terms of a deferred compensation fund set up under the Compensation Framework Agreement (ERA), a collective bargaining agreement in Germany.
Under this agreement, DaimlerChrysler had to recognize a liability in prior years for ERA as a portion of the compensation increase in these years was to be unconditionally paid to employees at a
later date. In an agreement with the worker's council of DaimlerChrysler, it was determined that the fund should be used for purposes such as termination and early retirement benefits with any unused
balance distributed to employees
otherwise. In 2005, €70 million were paid and €600 million remain within other liabilities at December 31, 2005.

F-28

---





smart realignment.Based on the unit sales development of the smart roadster and the smart forfour
and the downward revisions to forecasted sales targets, DaimlerChrysler reduced its production and notified suppliers about declining production at the beginning of 2005. These developments resulted
in increased operating and cash flow losses and an expectation that losses would continue in future periods. Therefore, DaimlerChrysler evaluated the recoverability of the carrying amount of the
long-lived assets that generate cash flows largely independent of other assets and liabilities of the Group. The smart roadster had been assembled in a plant in France until the decision
to cease production, whereas the asset group related to the smart forfour consists of owned real estate and equipment of a Dutch plant as well as leased equipment located with suppliers, but carried
on DaimlerChrysler's balance sheet. As a result of the impairment tests, DaimlerChrysler recognized charges of €444 million in 2005 in "cost of sales" representing the excess of
the carrying amount of these long-lived assets over their fair value. After the impairment charge, the remaining carrying amount of the assets represented the estimated fair value of land
and buildings and other assets.

As
a result of the deterioration of operations in the first quarter of 2005, DaimlerChrysler decided to cease production of the smart roadster by the end of 2005 and provide incentives
to dealers related to those vehicles. Thus, also included as a reduction of revenue or in "cost of sales" during 2005 were €140 million, to recognize the effects of inventory
write-downs, higher incentives and lower residual values of vehicles.

Further
costs related to the realignment of smart during 2005, amounting to €301 million, arose primarily from supplier claims which resulted from the
discontinuation of the smart roadster and the reduction of the production volume for the smart forfour. Estimated payments to the dealer network are also included. These charges were recognized in
"cost of sales" and in "selling expenses".

In
connection with the activities related to the smart business unit, DaimlerChrysler also decided in 2005 not to proceed with the development of the smart SUV that was scheduled to be
introduced in 2006. As a result of the decision to abandon the smart SUV, tooling and equipment located in the designated assembly plant in Brazil and equipment still under construction with suppliers
for which firm purchase orders were in place, €61 million were written off in 2005 by a charge to "other expenses" to the extent those assets could not be redeployed for other
purposes. Charges of €104 million were recognized during 2005 related to the liabilities arising from the cancellation of supply contracts and were recognized as "other
expenses".

In
addition, plans to reduce workforce at the locations in Böblingen (Germany) and Hambach (France) were approved in 2005. According to those plans, by December 31,
2005, 185 employees have been transferred to other Group operations and continue to provide services there while 236 German employees had accepted termination benefits in accordance with the terms of
a collective bargaining agreement consisting of cash severance, continued pay for a period after the end of service and job placement assistance; the employee services ended with the acceptance of the
termination benefits. Therefore, charges for employee termination benefits of €24 million are included in 2005. In addition, charges for consulting services have been recorded
totaling to €7 million in 2005.

A
goodwill impairment charge of €30 million was recognized in 2005 (see Note 12).

F-29

---



All
charges related to the realignment of smart, amounting to €1,111 million, relate to the Mercedes Car Group segment. The development of balances accrued in
2005, which lead to payments in subsequent periods, is summarized as follows:

(in millions of €)

Workforce
reduction

Other costs

TotalBalance at January 1, 2005





Net charges

24

552

576Payments

(16
)
(443
)
(459
)Balance at December 31, 2005

8

109

117


The
Mercedes Car Group expects the remaining balance of €117 million to be paid in 2006.

Others.In 2003, DaimlerChrysler recognized an impairment charge amounting to
€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.

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.

Personnel expenses and number of employees.Personnel expenses included in the statement of income
are comprised of:

Year ended December 31,(in millions of €)

2005

2004

2003Wages and salaries

19,750

18,750

18,897Social security and payroll costs

3,371

3,294

3,178Net pension cost (see Note 25a)

1,131

948

837Net postretirement benefit cost (see Note 25a)

1,331

1,173

1,290Other expenses for pensions and retirements

148

51

8525,731

24,216

24,287


Number
of employees (annual average):

2005

2004

2003Hourly employees

232,836

229,763

226,989Salaried employees

139,220

134,949

129,656Trainees/apprentices

14,409

14,307

14,039386,465

379,019

370,684


Information
on the remuneration to the current and former members of the Board of Management and to the current members of the Supervisory Board is included in Note 38.

F-30

---



6. Other Income

Other income consists of the following:

Year ended December 31,(in millions of €)

2005

2004

2003Gains on sales of property, plant and equipment

351

94

58Rental income, other than relating to financial services

101

100

110Gains on sales of companies

64

128

11Reimbursement of contract costs





17Government subsidies

33

30

63Other miscellaneous items

417

543

430966

895

689


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.

Gains
on sales of property, plant and equipment for the year ended December 31, 2005, include a €240 million gain on the sale of the Chrysler Group's
Arizona Proving Grounds vehicle testing facility.

Due
to the repurchase of a note by its issuer, a gain of €53 million was realized in 2005 and is included in gains of sales on property, plant and equipment. The
note was issued by MTU Aero Engines Holding AG to DaimlerChrysler in the context of the sale of MTU Aero Engines GmbH in 2003.

As
result of the settlement agreement in connection with the sale of DaimlerChrysler Rail Systems GmbH (Adtranz) in 2004, a gain of €120 million which had been
deferred since 2001 was realized as other income.

7. Turnaround Plan for the Chrysler Group

In 2001, the Supervisory Board of DaimlerChrysler AG approved a multi-year turnaround plan for the Chrysler Group. Key initiatives for the
multi-year turnaround plan included a workforce reduction and an elimination of excess capacity.

The
net gains recorded for the plan in 2005 were €36 million (€23 million net of taxes) and are presented as a separate line item on the
accompanying consolidated statements of income (€34 million and €2 million would have otherwise been reflected in cost of sales and selling,
administrative and other expenses, respectively). These adjustments were due to modifications of estimates related to workforce reductions and facility closures in 2005 and prior years.

The
net charges recorded for the plan in 2004 were €145 million (€89 million net of taxes) and are presented as a separate line item on the
accompanying consolidated statements of income (€139 million and €6 million would have otherwise been reflected in cost of sales and selling,
administrative and other expenses, respectively). These adjustments were due to modifications of estimates related to workforce reductions and facility closures in 2004 and prior years.

The
net charges recorded for the plan in 2003 were €469 million (€288 million net of taxes) and are presented as a separate line item on the
accompanying consolidated statements of income (loss) (€462 million and €7 million would have otherwise been reflected in cost of sales and selling,
administrative and other expenses, respectively). These adjustments were associated with the planned closing, significant downsizing and sale of

F-31

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certain
manufacturing facilities between 2003 and 2005. The adjustments were also the result of modifications to previous estimates due to actual settlements or additional available information.

Workforce
reduction charges in 2005, 2004 and 2003 were €(15) million, €154 million and €209 million respectively. The
charges for the voluntary early retirement programs, accepted by 223, 503 and 1,827 employees in 2005, 2004 and 2003, respectively, were formula driven based on salary levels, age and past service.
Additionally, 618, 5,417 and 1,355 employees were involuntarily affected by the plan in 2005, 2004 and 2003, respectively. The amount of involuntary severance benefits paid and charged against the
liability were €30 million, €51 million and €20 million in 2005, 2004 and 2003, respectively.

The
Chrysler Group recorded impairment charges of €(3) million, €43 million and €249 million in 2005, 2004 and 2003,
respectively. The 2005 impairment charges represent an adjustment to prior estimates related to facility closures. The 2004 and 2003 impairment charges represent the amount by which the carrying
values of the property, plant, equipment and tooling exceeded their respective fair market values.

In
addition, accruals for other costs related to divestiture and closure actions included net charges and adjustments of €(18) million, €(52) million and
€11 million during the years ended December 31, 2005, 2004 and 2003, respectively.

During
the years ended December 31, 2005, 2004 and 2003, the Chrysler Group made cash payments of €92 million, €219 million and
€279 million, respectively, for charges previously recorded.

The
Chrysler Group expects to make additional cash payments of approximately $58 million in 2006 for the previously recorded charges. The Chrysler Group may recognize additional
adjustments to the turnaround plan charges in 2006 primarily relating to the closure or sale of selected operations.

As
of December 31, 2005, 2004 and 2003, the Chrysler Group had workforce reduction reserves of €102 million, €160 million and
€198 million, respectively. In addition, reserves for other costs were €18 million, €60 million and
€148 million as of December 31, 2005, 2004 and 2003, respectively.

F-32

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8. Financial Income (Expense), net

Year ended December 31,(in millions of €)

2005

2004

2003Income from investments of which from affiliated companies €28 (2004: €36; 2003: €37)

55

86

37Gains, net from disposals of investments and shares in affiliated and associated companies

732

291

44Gain (loss) from the dilution of shares in affiliated companies and investments accounted for under the equity method



(135
)
24Impairment of investment in EADS (Note 3)





(1,960
)Write-down of investments and shares in affiliated companies

(31
)
(50
)
(44
)Gain (loss) from companies included at equity

103

(798
)
(538
)Income (loss) from investments, net

859

(606
)
(2,437
)Other interest and similar income of which from affiliated companies €33 (2004: €5; 2003: €20)

539

490

521Interest and similar expenses of which from affiliated companies €26 (2004: €32; 2003: €16)

(1,112
)
(790
)
(911
)Interest expense, net

(573
)
(300
)
(390
)Income (loss) from securities and long-term receivables of which from affiliated companies €2 (2004: €2; 2003: €1)

200

18

(15
)Write-down of securities and long-term receivables

(5
)
(122
)
(19
)Other, net

(264
)
(67
)
69Other financial income (loss), net

(69
)
(171
)
35217

(1,077
)
(2,792
)


In
2005, DaimlerChrysler sold all of its MMC shares. The gain on that sale amounted to €681 million and is included in "Gains, net from disposals of investments
and shares in affiliated and associated companies".

In
2004, the dilution of DaimlerChrysler's interest in MMC resulted in a loss of €135 million which is reflected in "Gain (loss) from the dilution of shares in
affiliated companies and investments accounted for under the equity method". Realized gains from DaimlerChrysler's currency hedging of the net investment in MMC of €195 million
are included in "Loss from companies included at equity".

In
2003, MTU-F created a new company, MTU CFC Solutions GmbH ("MTU CFC"), and contributed all of its fuel cell activities into a new company for 100% ownership interest. Also
in 2003, MTU CFC issued new shares to RWE Fuel Cells GmbH for a capital contribution. MTU-F did not participate in this increase in share capital causing the ownership interest of
MTU-F in MTU CFC to dilute to 74.9%. As a result of this transaction, DaimlerChrysler realized a gain of €24 million, which is included in "gain (loss) from the
dilution of shares in affiliated companies and investments accounted for under the equity method".

The
Group capitalized interest expenses related to qualifying construction projects of €73 million (2004: €70 million; 2003:
€100 million).

F-33

---



9. Income Taxes

Income before income taxes consists of the following:

Year ended December 31,(in millions of €)

2005

2004

2003Germany

(103
)
448

(736
)Non-German countries

3,541

3,087

1,3323,438

3,535

596


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 €1,960 million is also included.

Income
tax expense is comprised of the following components:

Year ended December 31,(in millions of €)

2005

2004

2003Current taxesGermany

3

847

766Non-German countries

1,319

923

(432
)Deferred taxesGermany

(309
)
(502
)
172Non-German countries

(500
)
(91
)
473513

1,177

979


For
German companies, the deferred taxes at December 31, 2005 were calculated using a federal corporate tax rate of 25% (2004 and 2003: 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% for each year. Therefore, the tax rate applied to German
deferred taxes amounted to 38.5% (2004 and 2003: 38.5%). For non-German companies, the deferred taxes at period-end were calculated using the enacted tax rates.

In
2004, the U.S. government enacted the American Jobs Creation Act of 2004 ("Act"), that provides for a special one-time tax deduction of 85% of certain earnings of
non-U.S. subsidiaries that are repatriated to the U.S., provided certain criteria are met. DaimlerChrysler North America Holding Corporation, a wholly-owned U.S. subsidiary of
DaimlerChrysler, completed in 2005 its evaluation of the Act. In 2005, DaimlerChrysler repatriated $2.7 billion of dividends to the U.S., leading to an income tax expense of
€66 million. In the reconciliation of expected income tax expense to actual income tax expense the expense is included in the line "foreign tax rate differential".

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 €64 million was included in the
consolidated statement of income (loss) in 2003.

F-34

---



A
reconciliation of expected income tax expense to actual income tax expense determined using the applicable German corporate tax rate for the calendar year of 25% (2004: 25%; 2003:
26.5%) plus a solidarity surcharge of 5.5% on federal corporate taxes payable plus the after federal tax benefit rate for trade taxes of 12.125% (2004: 12.125%; 2003: 11.842%) for a combined statutory
rate of 38.5% in 2005 (2004: 38.5%; 2003: 39.8%) is included in the following table. In 2003, for the purpose of financing the flood disaster in Germany and effective only for the calendar year 2003,
the increased federal corporate tax rate of 26.5% instead of 25% was used for calculating the current taxes in Germany.

Year ended December 31,(in millions of €)

2005

2004

2003Expected expense for income taxes

1,324

1,361

237Foreign tax rate differential

(544
)
(357
)
(489
)Trade tax rate differential

(50
)
(43
)
(37
)Non-deductible impairment of investment in EADS





780Tax effect of equity method investments

(15
)
291

159Tax-free income and non-deductible expenses

(194
)
(88
)
269Effect of changes in German tax laws





64Other

(8
)
13

(4
)Actual expense for income taxes

513

1,177

979


In
2005, tax free income at foreign companies arose relating to the compensation for MFTBC, the sale of other securities and in connection with the net periodic postretirement benefit
costs. The reduction of the calculated expected tax expenses on those issues is included in the line "foreign tax rate differential". Moreover, the line "foreign tax rate differential" includes all
other reconciling items between expected and actual expense for income taxes at foreign companies.

In
2005, DaimlerChrysler sold all of its MMC shares. The realized gain  with the exception of the net gains from hedging the Group's net investment in MMC  was
tax-free. The expected tax expense on the tax free gain was reversed in the line "tax free income and non-deductible expenses" with an amount of
€82 million. In 2004, the non tax-deductible loss of MMC resulting from accounting under the equity method and from the dilution of DaimlerChrysler's interest in MMC
affected the line "tax effect of equity method investments" negatively by €298 million due to the missing tax benefit.

In
2004, Daimler Chrysler sold its investment in HMC and realized a tax free gain of €252 million. This led to a positive reconciling item of
€97 million in the line "tax free income and non-deductible expenses".

Tax
free gains included in net periodic pension costs at the German companies also reduced the expected tax expense. Moreover, the line "tax-free income and non-deductible
expenses" includes all other effects at German companies due to tax free income and non-deductible expenses.

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. In 2003, the line "foreign tax rate differential" above included a tax benefit and related interest of €571 million which resulted in
connection with agreements reached with the U.S. tax authorities on a claim pertaining to additional research and development credits for tax years 1986 through 1998. In 2003, the line "tax free
income and non-deductible expenses" included a tax expense
and related interest of €318 million pertaining primarily to tax costs associated with developments resulting from the examination by the German tax authorities of the Group's
German tax returns for the years 1994 to 1998.

F-35

---



Deferred
income tax assets and liabilities are summarized as follows:

At December 31,(in millions of €)

2005

2004Intangible assets

401

55Property, plant and equipment

520

699Investments and long-term financial assets

3,135

2,678Equipment on operating leases

727

651Inventories

752

675Receivables

749

834Net operating loss and tax credit carryforwards

1,854

2,814Pension plans and similar obligations

5,125

4,315Other accrued liabilities

6,477

5,515Liabilities

2,516

3,000Deferred income

1,670

1,371Other

111

9524,037

22,702Valuation allowances

(640
)
(573
)Deferred tax assets

23,397

22,129Intangible assets

(932
)
(852
)Property, plant and equipment

(3,987
)
(3,798
)Equipment on operating leases

(7,125
)
(6,699
)Receivables

(3,482
)
(4,540
)Prepaid expenses

(360
)
(370
)Pension plans and similar obligations

(2,479
)
(2,096
)Other accrued liabilities

(311
)
(148
)Taxes on undistributed earnings of non-German subsidiaries

(261
)
(307
)Liabilities

(1,010
)
(1,012
)Other

(404
)
(406
)Deferred tax liabilities

(20,351
)
(20,228
)Deferred tax assets (liabilities), net

3,046

1,901


At
December 31, 2005, the Group had corporate tax net operating losses ("NOLs") amounting to €1,528 million (2004: €1,705 million),
trade tax NOLs amounting to €129 million (2004: €81 million) and tax credit carryforwards amounting to €868 million (2004:
€1,640 million). The corporate tax NOLs mainly relate to losses of foreign companies and are partly limited in their use to the Group. Of the total amount of corporate tax NOLs
at December 31, 2005, €25 million expire at various dates from 2006 through 2009, €704 million in 2010, €275 million expire
at various dates from 2018 through 2025 and €524 million can be carried forward indefinitely. The tax credit carryforwards mainly relate to U.S. companies and are partly limited
in their use to the Group. Of the total amount of credit carryforwards at December 31, 2005, €107 million expire from 2010 through 2015,
€181 million expire from 2023 through 2025 and €580 million can be carried forward indefinitely. The trade tax NOLs are not limited in their use. The
companies of the Off-Highway Business unit, which are shown as held for sale, are included at December 31, 2005 in the corporate and trade tax NOLs with
€21 million each.

The
valuation allowances, which relate to deferred tax assets of foreign companies that DaimlerChrysler believes will more likely than not expire without benefit increased by
€67 million from December 31, 2004 to

F-36

---



December 31,
2005. In future periods DaimlerChrysler's estimate of the amount of the deferred tax assets considered realizable may change, and hence the valuation allowances may increase or
decrease.

Net
deferred income tax assets and liabilities in the consolidated balance sheets are as follows:

At December 31,
2005

At December 31,
2004(in millions of €)

Total

thereof non-current

Total

thereof non-currentDeferred tax assets

7,249

2,880

4,213

1,944Deferred tax liabilities

(4,203
)
(4,099
)
(2,312
)
(2,222
)Deferred tax assets (liabilities), net

3,046

(1,219
)
1,901

(278
)


DaimlerChrysler
recorded deferred tax liabilities for non-German withholding taxes of €188 million (2004: €222 million) on
€3,764 million (2004: €4,434 million) in cumulative undistributed earnings of non-German subsidiaries and additional German tax of
€73 million (2004: €85 million) on the future payout of these foreign dividends to Germany because as of today, 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 €13,831 million (2004: €9,626 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 stockholders' equity 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 €)

2005

2004

2003Expense for income taxes of continuing operations

513

1,177

979Expense for income taxes of discontinued operations





202Income tax benefit from changes in accounting principles

(3
)


(35
)Stockholders' equity for items in accumulated other comprehensive loss

(1,065
)
(754
)
1,055Stockholders' equity for U.S. employee stock option expense in excess of amounts recognized for financial purposes



(9
)
(555
)
414

2,201


In
2004 and 2003, tax benefits of €2 million and €105 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. Disposal Group Off-Highway, Assets and Liabilities Held for Sale and Discontinued Operations

Disposal Group Off-Highway, Assets and Liabilities Held for Sale.On December 27,
2005, DaimlerChrysler entered into a share sale and purchase agreement regarding the sale of a major portion of its Off-Highway Business Unit. The closing is expected to occur in the first
quarter of 2006 (see Note 4). As a result of

F-37

---



DaimlerChrysler's
significant anticipated continuing sales of products to the Off-Highway business which are expected to continue beyond one year after disposal, the operations of the
Off-Highway business have not been presented as discontinued operations in DaimlerChrysler's consolidated income statements.

However,
the assets and the liabilities of the Off-Highway business that are part of the transaction have each been aggregated and presented in separate lines on the
consolidated balance sheet.

The
assets held for sale and liabilities held for sale are shown on a consolidated basis and are comprised of the following:

(in millions of €)

At December 31, 2005Assets held for saleIntangible assets

20Goodwill

309Property, plant and equipment

212Investments and long-term financial assets

80Inventories

395Receivables and other assets

316Other

421,374Liabilities held for saleMinority interests

4Accrued liabilities

603Liabilities

157Other

7771


Discontinued Operations.The results of MTU Aero Engines and the gain on sale are reported as
discontinued operations. However, for segment reporting purposes, the revenues and operating profit of MTU Aero Engines are included in the Other Activities segment revenues and operating profit in
2003 (see Notes 4 and 35).

The
operating results of the discontinued operations were as follows in 2003:

(in millions of €)

Year ended December 31, 2003Revenues

1,933Income before income taxes

67Income taxes

(53
)Earnings from discontinued operations

14


11. Cumulative Effects of Changes in Accounting Principles

Conditional Asset Retirement Obligation.As of December 31, 2005, DaimlerChrysler adopted the
provisions of FIN 47, "Accounting for Conditional Asset Retirement Obligations  an interpretation of FASB Statement No. 143" pertaining to the accounting for legal asset retirement
obligations whose timing or method of

F-38

---



settlement
is conditional on a future event. For existing conditional asset retirement obligations whose fair value could be reasonably determined, DaimlerChrysler recognized the liability and related
additional long-lived asset and adjusted the liability and the asset, respectively, for cumulative accretion and accumulated depreciation to the date of adoption. The cumulative effect of
adopting FIN 47 was a reduction of net income of €5 million, net of taxes of €3 million (€0.00 per share), recognized separately in the
consolidated statement of income in 2005.

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, and to all other entities as of March 31, 2004 (see Note 2). The cumulative
effect of adopting FIN 46R was a reduction of net income of €30 million, net of taxes of €35 million (€0.03 per share), recognized in the
consolidated statement of income in 2003.

Notes to Consolidated Balance Sheets

12. Goodwill

Information with respect to changes in the Group's goodwill is presented in the Consolidated Fixed Asset Schedule included herein.

The
carrying amount of goodwill as of December 31, 2005, compared to the previous year, decreased by €122 million. This decrease relates to goodwill of
€309 million attributable to the business unit Off-Highway and is included in the separate line item "assets held for sale" as of December 31, 2005 (see
Note 10). Additions to goodwill of €134 million from the acquisition of the minority interests in MTU-F in 2005 form part of that goodwill (see
Note 4). Furthermore, the goodwill of MFTBC was reduced by €200 million (see Note 4). Currency translation effects of €232 million led to an
increase of goodwill.

At
December 31, 2005 and 2004, the carrying value of goodwill allocated to the Group's reporting segments are (excluding investor level goodwill of
€55 million and €51 million, respectively):

(in millions of €)

Mercedes
Car Group

Chrysler Group

Commercial
Vehicles

Financial Services

Other Activities

total2005

199

1,035

547

63

37

1,8812004

177

898

670

62

196

2,003


The
company conducts a goodwill impairment test at least annually to identify potential goodwill impairment. In this regard, the company compares the fair value of a reporting unit with
its carrying amount, including goodwill allocated to the respective reporting unit. The fair values of the reporting units are calculated using discounted future cash flows. If the carrying amount of
a reporting unit exceeds its fair value, a second step of the goodwill impairment test is performed to measure the amount of goodwill impairment loss. As a result of the 2005 goodwill impairment test,
a goodwill impairment charge at smart of €30 million was recognized.

13. Other Intangible Assets

Information with respect to changes in the Group's other intangible assets is presented in the Consolidated Fixed Asset Schedule included herein.

F-39

---



Other
intangible assets comprise:

At December 31,(in millions of €)

2005

2004Other intangible assets subject to amortizationGross carrying amount

1,628

1,309Accumulated amortization

(941
)
(806
)Net carrying amount

687

503Other intangible assets not subject to amortization

2,504

2,1683,191

2,671


DaimlerChrysler's
other intangible assets subject to amortization represent concessions, industrial property rights and similar rights (€298 million) as well as
software developed or obtained for internal use (€342 million). The additions in 2005 of €244 million (2004: €215 million) with a
weighted average useful life of 6 years primarily include software developed or obtained for internal use. The aggregate amortization expense for the years ended December 2005, 2004 and
2003, was €201 million, €169 million and €178 million, respectively.

Estimated
aggregate amortization expense for other intangible assets for the next five years is:

(in millions of €)

2006

2007

2008

2009

2010Amortization expense

213

136

109

54

40


Other
intangible assets not subject to amortization represent primarily 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 €262 million (2004:
€245 million). Depreciation expense and impairment charges on assets under capital lease arrangements were €47 million (2004:
€34 million; 2003: €19 million).

Future
minimum lease payments due for property, plant and equipment under capital leases at December 31, 2005 amounted to €472 million and are due as
follows:

(in millions of €)

2006

2007

2008

2009

2010

there-
afterFuture minimum lease payments

75

72

53

33

30

209


The
reconciliation of future minimum lease payments from capital lease agreements to the corresponding liabilities is as follows:

(in millions of €)

December 31, 2005Amount of future minimum lease payments

472Less interests included

133Liabilities from capital lease agreements

339


F-40

---



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, €33,644 million represent automobiles and commercial vehicles (2004: €26,017 million).

Noncancellable
future lease payments due from customers for equipment on operating leases at December 31, 2005 amounted to €15,500 million and are due as
follows:

(in millions of €)

2006

2007

2008

2009

2010

there-
afterFuture lease payments

7,918

4,350

2,225

738

149

120


16. Inventories

At December 31,(in millions of €)

2005

2004Raw materials and manufacturing supplies

1,906

1,746Work-in-process

2,924

2,545Finished goods, parts and products held for resale

14,414

12,805Advance payments to suppliers

47

7519,291

17,171Less: Advance payments received

(152
)
(366
)19,139

16,805


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
€753 million (2004: €601 million).

At
December 31, 2005, inventories include €322 million of company cars of DaimlerChrysler pledged as collateral to the DaimlerChrysler Pension Trust e.V.
The pledge was made in 2004 due to the requirement to provide collateral for certain vested employee benefits in Germany.

17. Trade Receivables

At December 31,(in millions of €)

2005

2004Receivables from sales of goods and services

8,135

7,592Allowance for doubtful accounts

(540
)
(591
)7,595

7,001


As
of December 31, 2005, €115 million of the trade receivables mature after more than one year (2004: €283 million).

F-41

---



Changes
in the allowance for doubtful accounts for trade receivables were as follows:

Year ended December 31,(in millions of €)

2005

2004

2003Balance at beginning of year

591

587

629Charged to costs and expenses

41

49

23Amounts written off

(75
)
(160
)
(48
)Currency translation and other changes

(17
)
115

(17
)Balance at end of year

540

591

587


18. Receivables from Financial Services

Types of receivables.Retail receivables include loans and finance leases to end users of the Group's
products who purchased their vehicle either from a dealer or directly from DaimlerChrysler.

Wholesale
receivables represent loans for floor financing programs for vehicles sold by the Group's automotive businesses to the dealer or loans for assets purchased by the dealer from
third parties, primarily used vehicles traded in by the dealer's customer or real estate such as dealer showrooms.

Other
receivables mainly represent investments in leases involving the purchase of non-automotive assets by parties other than retail customers or the Group's dealers.

Receivables
from financial services are comprised of the following:

At December 31,(in millions of €)

2005

2004Receivables from:Retail

46,947

44,202Wholesale

11,961

10,670Other

3,367

3,02062,275

57,892Allowance for doubtful accounts

(1,174
)
(1,107
)61,101

56,785


As
of December 31, 2005, receivables from financial services with a carrying amount of €37,896 million mature after more than one year (2004:
€35,598 million). Receivables from financial services are generally secured by vehicles or other assets.

Maturities.Contractual payments from the receivables from financial services at December 31,
2005 amounted to €66,235 million and are as follows:

(in millions of €)

2006

2007

2008

2009

2010

there-
afterMaturities

25,600

13,338

11,014

6,701

3,533

6,049


Actual
cash flows will vary from contractual maturities due to future sales of finance receivables, prepayments and write-offs.

F-42

---



Allowances.Changes in the allowance for doubtful accounts for receivables from financial services
were as follows:

Year ended December 31,(in millions of €)

2005

2004

2003Balance at beginning of year

1,107

1,265

1,559Charged to costs and expenses

559

467

553Amounts written off

(420
)
(413
)
(492
)Reversals

(137
)
(84
)
(63
)Currency translation and other changes

65

(128
)
(292
)Balance at end of year

1,174

1,107

1,265


Sales type and direct financing contracts.Finance leases consist of sales-type leases of
vehicles to the Group's direct retail customers and direct-financing leases of vehicles to customers of the Group's independent dealers. Included in retail and other receivables are investments in
finance leases involving minimum lease payments of €15,309 million and €14,072 million, unearned income of €2,496 million and
€2,602 million, initial direct costs of €43 million and €47 million and estimated unguaranteed residual values of
€623 million and €660 million at December 31, 2005 and 2004, respectively.

Leveraged lease contracts.Investments in leveraged leases are included in the line "other".
Leveraged leases are comprised of the following:

At December 31,(in millions of €)

2005

2004Rentals receivable (net of principal and interest on nonrecourse debt)

4,586

4,039Deferred investment tax credits

(41
)
(40
)4,545

3,999Unguaranteed residual values

588

617Unearned income

(1,780
)
(1,638
)3,353

2,978


As
of December 31, 2005, an amount of €2,775 million (2004: €2,421 million) of deferred income tax liabilities was related to
leveraged leases.

Presentation in Consolidated Statements of Cash Flows.Wholesale receivables from the sale of
vehicles from the Group's inventory to independent dealers as well as retail receivables from the sale of DaimlerChrysler's vehicles directly to retail customers relate to the sale of the Group's
inventory. The cash flow effects of such receivables are presented as "net changes in inventory-related receivables from financial services" within the consolidated cash flows from operating
activities. All cash flow effects attributable to receivables from financial services that are not related to the sale of inventory to DaimlerChrysler's independent dealers or direct customers are
classified as investing activities within the consolidated statements of cash flows.

Sale of receivables.Based on market conditions and liquidity needs, DaimlerChrysler may sell
portfolios of retail and wholesale receivables to third parties, which typically results in the de-recognition of the transferred receivables from the balance sheet. Retained interests in
securitized sold receivables are
classified as other assets in the Group's consolidated balance sheets (see Note 19). For additional information on retained interests in sold receivables and the sale of finance receivables,
see Note 34.

F-43

---



19. Other Assets

At December 31,(in millions of €)

2005

2004Receivables from affiliated companies

696

1,174Receivables from related companies1

324

588Retained interests in sold receivables

2,215

2,202Other receivables and other assets

5,664

9,2288,899

13,192Allowance for doubtful accounts

(168
)
(261
)8,731

12,931


---

As
of December 31, 2005, €2,618 million of the other assets mature after more than one year (2004: €3,494 million).

Changes
in the allowance for doubtful accounts related to receivables included in other assets were as follows:

Year ended December 31,(in millions of €)

2005

2004

2003Balance at beginning of year

261

888

723Charges (releases) to costs and expenses

(18
)
61

134Amounts written off

(90
)
(702
)
(2
)Currency translation and other changes

15

14

33Balance at end of year

168

261

888


20. Securities, Investments and Long-Term Financial Assets

Information with respect to the Group's total investments and long-term financial assets is presented in the Consolidated Fixed Assets Schedule
included herein. The carrying amounts of participations (investments that are not accounted for under the equity method) and long-term (marketable) securities which are shown among
"Investments and long-term financial assets" in the Consolidated Balance Sheets are comprised of the following:

At December 31,(in millions of €)

2005

2004Participations with a quoted market price

332

503Participations without a quoted market price

256

277Total participations

588

780Long-term securities

606

599


The
main changes in investments in participations were caused by the sale of the stake in MMC (see Note 3).

F-44

---





Investments without a quoted market price were tested for impairment when an impairment indicator occurred. In 2005 and 2004, investments without a quoted market
price with carrying amounts of €20 million were tested for impairment. In 2005 and 2004, no impairments were recognized.

The
disclosure of short-term securities is made in the Consolidated Balance Sheets among "Securities" and is recorded separately in available-for-sale
and trading:

At December 31,(in millions of €)

2005

2004Available-for-sale

4,773

3,725Trading

163

159Short-term securities

4,936

3,884


As
of December 31, 2005, the table below shows the (amortized) costs, fair values, gross unrealized holding gains and losses per security class of investments with a quoted market
price, long-term and short-term available-for-sale securities. The aggregate amounts of
unrealized losses on investments which are in a continuous unrealized loss position for less than 12 months and the aggregate amounts of unrealized losses on investments which are in a
continuous unrealized loss position for 12 months or longer are shown separately together with their appropriate fair values.

|                                                                                 |  |       |  |       |  |     |  | Unrealized Loss
less 1 year |  | Unrealized Loss
1 year or more |  | Unrealized Loss total
|-------------------------------------------------------------------------------- |  | ----- |  | ----- |  | --- |  | --------------------------- |  | ------------------------------ |  | ---------------------
|
|Equity securities                                                                |  | 279   |  | 664   |  | 388 |  | 12                          |  | 3                              |  |                     
|Equity-based funds                                                               |  | 272   |  | 273   |  | 1   |  |                            |  |                               |  |                     
|Debt securities issued by the German government and other political subdivisions |  | 205   |  | 205   |  |    |  |                            |  |                               |  |                     
|Debt securities issued by non-German governments                                 |  | 778   |  | 777   |  |    |  | 34                          |  | 1                              |  |                     
|Corporate debt securities                                                        |  | 2,796 |  | 2,796 |  | 9   |  | 547                         |  | 6                              |  | 26                   
|Mortgage-backed securities                                                       |  | 318   |  | 317   |  | 1   |  | 68                          |  | 1                              |  | 35                   
|Securities backed by other assets                                                |  | 190   |  | 190   |  |    |  |                            |  |                               |  |                     
|Other debt securities                                                            |  | 260   |  | 260   |  |    |  |                            |  |                               |  |                     
|Debt-based funds                                                                 |  | 228   |  | 229   |  | 1   |  |                            |  |                               |  |                     
|                                                                                 |  |       |  |       |  |     |  |                             |  |                                |  |                      
|                                                                                 |  | 5,326 |  | 5,711 |  | 400 |  | 661                         |  | 11                             |  | 61                   
|                                                                                 |  |       |  |       |  |     |  |                             |  |                                |  |                      

F-45

---



As of December 31, 2004, these values were as follows:

|                                                                                 |  |       |  |       |  |     |  | Unrealized Loss
less 1 year |  | Unrealized Loss
1 year or more |  | Unrealized Loss total
|-------------------------------------------------------------------------------- |  | ----- |  | ----- |  | --- |  | --------------------------- |  | ------------------------------ |  | ---------------------
|
|Equity securities                                                                |  | 560   |  | 948   |  | 394 |  |                            |  |                               |  | 134                  
|Equity-based funds                                                               |  | 175   |  | 175   |  |    |  |                            |  |                               |  |                     
|Debt securities issued by the German government and other political subdivisions |  | 360   |  | 360   |  | 1   |  |                            |  |                               |  | 1                    
|Debt securities issued by non-German governments                                 |  | 128   |  | 132   |  | 4   |  |                            |  |                               |  |                     
|Corporate debt securities                                                        |  | 1,718 |  | 1,726 |  | 12  |  | 96                          |  | 4                              |  |                     
|Mortgage-backed securities                                                       |  | 361   |  | 361   |  | 1   |  | 41                          |  | 1                              |  |                     
|Securities backed by other assets                                                |  | 170   |  | 170   |  |    |  |                            |  |                               |  |                     
|Other debt securities                                                            |  | 819   |  | 820   |  | 1   |  |                            |  |                               |  |                     
|Debt-based funds                                                                 |  | 135   |  | 135   |  |    |  |                            |  |                               |  |                     
|                                                                                 |  |       |  |       |  |     |  |                             |  |                                |  |                      
|                                                                                 |  | 4,426 |  | 4,827 |  | 413 |  | 137                         |  | 5                              |  | 135                  
|                                                                                 |  |       |  |       |  |     |  |                             |  |                                |  |                      

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 €)

2005

2004Due within one year

1,164

1,157Due after one year through five years

1,703

1,624Due after five years through ten years

508

330Due after more than ten years

1,170

4584,545

3,569


Proceeds
from disposals of long-term and short-term available-for-sale securities were €10,336 million (2004:
€3,702 million; 2003: €2,743 million). Gross realized gains from sales of these securities were €847 million (2004:
€254 million; 2003: €8 million), while gross realized losses were €8 million (2004: €3 million; 2003:
€15 million). The proceeds and realized gains from the sale of the stake in MMC in 2005 (see Note 3) and HMC in 2004 (see Note 4) are included in these figures.
The proceeds from the sale of the stake in HMC are shown in the Consolidated Statements of Cash Flows among the line item "Proceeds from disposals of businesses", the remaining proceeds are disclosed
in the line item "Proceeds from sales of securities (other than trading)".

The
unrealized losses included in the 2005 statement of income related to trading securities were €6 million (2004 and 2003: -). There are no unrealized gains in
these securities (2004: €2 million; 2003: €10 million).

DaimlerChrysler
uses the weighted average cost method as a basis for determining cost and calculating realized gains and losses.

F-46

---



21. Liquid Assets

Liquid assets recorded under various balance sheet captions are as follows:

At December 31,2005

2004Cash and cash equivalents1originally maturing within 3 months

7,619

7,381originally maturing after 3 months

92

401Total cash and cash equivalents

7,711

7,782Securities

4,936

3,88412,647

11,666


---

22. Prepaid Expenses

Prepaid expenses are comprised of the following:

At December 31,(in millions of €)

2005

2004Prepaid pension cost

595

246Other prepaid expenses

796

7841,391

1,030


As
of December 31, 2005, €809 million of the total prepaid expenses mature after more than one year (2004: €435 million).

As
a result of the overfunded status of the accumulated pension benefit obligations of one pension plan, the prepaid pension cost increased in 2005 by
€0.3 billion.

23. Stockholders' Equity

Number of Shares Issued and Outstanding as well as Treasury Stock.DaimlerChrysler had issued and
outstanding 1,018,172,696 registered Ordinary Shares of no par value at December 31, 2005 (2004: 1,012,824,191). This increase relates to the issuance of new Ordinary Shares upon exercises in
connection with the Stock Option Plan 2000 (tranche 2003). Each share represents a nominal value of €2.60 of capital stock.

In
2005, DaimlerChrysler purchased approximately 0.7 million (2004: 0.8 million; 2003: 1.3 million) Ordinary Shares in connection with an employee share purchase
plan, of which 0.7 million (2004: 0.8 million; 2003: 1.3 million) were re-issued to employees.

Authorized and Conditional Capital.On April 6, 2005, the annual meeting authorized
DaimlerChrysler through October 6, 2006, to acquire treasury stocks for certain defined purposes up to a maximum nominal amount of €263 million of capital stock,
representing nearly 10% of the issued and outstanding capital stock.

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

F-47

---



exchange
for cash contributions totaling €500 million as well as by issuing new, no par value registered shares in exchange for non-cash contributions totaling
€500 million and to increase capital stock by issuing Ordinary Shares to employees totaling €26 million.

Furthermore,
the Board of Management, with the consent of the Supervisory Board, was authorized to issue convertible bonds and / or notes with warrants with a total face value up
to €15 billion and with a maturity of no more than twenty years prior to April 5, 2010, and to grant conversion or option rights for new shares in DaimlerChrysler with an
allocable portion of the capital stock of up to €300 million as more closely defined in the fixed terms and conditions.

From
the Stock Option Plan 1996 on December 31, 2005, outstanding rights in a nominal volume of €0.1 million could result in 22,110 new shares of
DaimlerChrysler AG. In 2005, 2004 and 2003, no options were exercised from this Plan.

Comprehensive Income/(Loss).The changes in the components of accumulated other comprehensive loss
are as follows:

|                                                                            |  | Year ended
December 31, 2005 |   | Year ended
December 31, 2004 |   | Year ended
December 31, 2003 |  
|--------------------------------------------------------------------------- |  | ---------------------------- | - | ---------------------------- | - | ---------------------------- | -
|
|Unrealized gains (losses) on securities (incl. retained interests):         |  |                              |   |                              |   |                              |  
|Unrealized holding gains (losses)                                           |  | 511                          |   | (136                         | ) | 375                          |  
|Reclassification adjustments for (gains) losses included in net income      |  | (512                         | ) | 119                          |   | (393                         | )
|                                                                            |  |                              |   |                              |   |                              |  
|Unrealized gains (losses) on securities                                     |  | (1                           | ) | (17                          | ) | (18                          | )
|Unrealized gains (losses) on derivatives hedging variability of cash flows: |  |                              |   |                              |   |                              |  
|Unrealized derivative gains (losses)                                        |  | (3,552                       | ) | 1,270                        |   | (2,282                       | )
|Reclassification adjustments for (gains) losses included in net income      |  | 1,517                        |   | (458                         | ) | 1,059                        |  
|                                                                            |  |                              |   |                              |   |                              |  
|Unrealized derivative gains (losses)                                        |  | (2,035                       | ) | 812                          |   | (1,223                       | )
|Minimum pension liability adjustments                                       |  | (170                         | ) | 91                           |   | (79                          | )
|Foreign currency translation adjustments                                    |  | 2,548                        |   | 179                          |   | 2,727                        |  
|                                                                            |  |                              |   |                              |   |                              |  
|Changes in other comprehensive income/(loss)                                |  | 342                          |   | 1,065                        |   | 1,407                        |  
|                                                                            |  |                              |   |                              |   |                              |  

Exchange
rate effects on the components of other comprehensive loss principally are shown within changes of the cumulative translation adjustment.

Effective
October 1, 2004, the Chrysler Group prospectively changed the functional currency of DaimlerChrysler Canada Inc. ("DCCI"), its Canadian subsidiary, from the U.S.
dollar to the Canadian dollar. This change resulted from several significant economic and operational changes within DCCI, including a reduction of U.S. sourced components. The initial implementation
of this change in functional currency had the effect of increasing the value of the net assets of the Group and the accumulated other comprehensive loss by €179 million in 2004.

Miscellaneous.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, 2005, DaimlerChrysler management has

F-48

---



proposed
a distribution of €1,527 million (€1.50 per share) of the 2005 earnings of DaimlerChrysler AG as a dividend to the stockholders.

24. Stock-Based Compensation

As of December 31, 2005, the Group has awards outstanding that were issued under a variety of plans including (1) the 2005 Performance Phantom Share
Plan, (2) the 2000 and 1996 stock option plans, (3) various stock appreciation rights ("SARs") plans and (4) the 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.

Performance Phantom Share Plan.In 2005 the Group adopted the "Performance Phantom Share Plan" under
which virtual shares (phantom shares) are granted to eligible employees entitling them to receive cash paid out after four years. The amount of cash paid to eligible employees is based on the number
of phantom shares that vest (determined over a three year performance period) times the quoted price of DaimlerChrysler's
Ordinary Shares (determined as an average price over a specified period at the end of the four-year service). The number of phantom shares that vest will depend on the achievement of Group
performance goals as compared with competitive and internal benchmarks (return on net assets and return on sales). The Group will not issue any common shares in connection with the Performance Phantom
Share Plan.

Analysis
of the phantom shares issued is as follows:

Number of
phantom shares
(in millions)Outstanding at the beginning of the year

Granted phantom shares

3.6Forfeitures/Disposals

Outstanding at year end

3.6


In
2005 the group recognized €30 million of compensation expenses related to the Performance Phantom Share Plan. The Group considers the Performance Phantom Share
Plan in the accrued liabilities. Because the payment per vested phantom share depends on the quoted price of one DaimlerChrysler Ordinary Share, the quoted price represents the fair value of each
phantom share. The proportionate compensation expense for 2005 is determined based on the year-end quoted price of DaimlerChrysler Ordinary Shares as well as the estimated target
achievement grades as of December 31, 2005.

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%.

F-49

---



The
table below shows the basic terms of options issued (in millions):

At December 31, 2005Year of grant

Reference
price

Exercise
price

Options
granted

Options
outstanding

Options
exercisable2000

€62.30

€74.76

15.2

13.3

13.32001

€55.80

€66.96

18.7

16.7

16.72002

€42.93

€51.52

20.0

18.5

18.52003

€28.67

€34.40

20.5

13.8

4.32004

€36.31

€43.57

18.0

17.3




In
2005, no options were granted under the Stock Option Plan 2000.

DaimlerChrysler
established, based on shareholder approvals, the 1998, 1997 and 1996 Stock Option Plans (former Daimler-Benz plans), which provided for the granting of
options for the purchase of DaimlerChrysler Ordinary Shares to certain members of management. The options granted under the plans 1997 and 1998 were evidenced by non-transferable
convertible bonds with a principal amount of €511 per bond due ten years after issuance. During certain specified periods each year, each convertible bond could have been converted
into 201 DaimlerChrysler Ordinary Shares, if the market price per share on the day of conversion was at least 15% higher than the predetermined conversion price and the options had been held for a
24 month waiting period.

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 price of the original option and the fair value of
the Group's stock at the exercise date rather than receiving DaimlerChrysler Ordinary Shares.

All
terms and conditions of the options granted under the plan 1996 are identical to the stock options which were granted under the plans 1997 and 1998, except that the plan 1996
includes no waiting period. The options granted under the plan 1996 were not converted into SARs.

The
basic terms of the bonds and the related stock options/SARs issued (in millions) under these plans are as follows:

Stock options/SARs
At December 31, 2005Related
stock
options
grantedStated
interest rate

Conversion
priceBonds granted in

outstanding

exercisable1996

5.9
%
€42.62

0.9



1997

5.3
%
€65.90

7.4

4.6

4.61998

4.4
%
€92.30

8.2

5.3

5.3


The
Group will not issue any common shares in connection with the plans 1997 and 1998.

F-50

---



Analysis
of the stock options issued is as follows (options in millions; per share amounts in €):

2005

2004

2003Number of
stock options

Average
exercise
price
per share

Number of
stock options

Average
exercise
price
per share

Number of
stock options

Average
exercise
price
per shareBalance at beginning of year

86.5

52.78

71.6

55.18

53.1

63.40Options granted





18.0

43.57

20.5

34.40Exercised

(5.3
)
34.40







Forfeited

(0.3
)
41.42

(1.4
)
40.79

(1.2
)
51.83Expired

(1.3
)
60.13

(1.7
)
65.92

(0.8
)
74.76Outstanding at year-end

79.6

53.92

86.5

52.78

71.6

55.18Exercisable at year-end

52.8

60.82

40.2

65.92

23.1

71.71


For
the year ended December 31, 2005, the Group recognized compensation expense on stock options (before taxes) of €87 million (2004:
€119 million; 2003: €95 million).

The
fair values of the DaimlerChrysler stock options issued in 2004 and 2003 were measured at the grant date (beginning of April) based on a modified Black-Scholes option-pricing model,
which considers the specific terms of issuance. For options granted to the Board of Management in 2004 and for which  according to the recommendations of the German
Corporate Governance Code  the Presidential Committee can impose a limit or reserve the right to impose such a limit in the case of exceptional and unpredictable
developments, are calculated with the intrinsic value at December 31. The table below presents the underlying assumptions as well as the resulting fair values and total values (in millions of
€):

2004

2003Expected dividend yield

4.4
%
5.6
%Expected volatility

33
%
35
%Risk-free interest rate

2.6
%
2.9
%Expected lives (in years)

3

3Fair value per option

€7.85

€6.00Total value by award

131.9

123.0


Unearned
compensation expense (before taxes) of all outstanding and unvested stock options as of December 31, 2005, that are not subject to a possible limitation according the
recommendation of the German Corporate Governance Code, totals €35 million (2004: €125 million; 2003: €122 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 €89.70 each ($98.76 for Chrysler employees), of which 8.2 million SARs are outstanding and exercisable at December 31, 2005.

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-51

---



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 10.0 million SARs are outstanding and exercisable at December 31, 2005. 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, 2005, 2004 and 2003 is presented below (SARs in millions; per share amounts
in €):

2005

2004

2003Number
of SARs

Weighted-
average
exercise
price

Number
of SARs

Weighted-
average
exercise
price

Number
of SARs

Weighted-
average
exercise
priceOutstanding at beginning of year

32.5

71.37

36.3

74.24

40.3

79.13Granted











Exercised











Forfeited

(4.5
)
67.16

(3.8
)
72.54

(4.0
)
75.00Outstanding at year-end

28.0

76.65

32.5

71.37

36.3

74.24SARs exercisable at year-end

28.0

76.65

32.5

71.37

36.3

74.24


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, 2005, 2004 and 2003, the Group recognized no compensation expense in connection with SARs, because the options underlying exercise prices were greater than the
market price for DaimlerChrysler Ordinary Shares at December 31, 2005.

Medium Term Incentive Awards.The Group granted medium term incentives to certain eligible employees
with 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. In 2005 no
medium term incentive awards (2004: 0.7 million awards; 2003: 1.3 million awards) were issued.

The
Group considers the medium term incentive awards with their fair value in the accrued liabilities and recognized €25 million gains (2004:
€12 million expenses; 2003: €35 million expenses) from the valuation of this accrued liability.

F-52

---



25. Accrued Liabilities

Accrued liabilities are comprised of the following:

At December 31,

At December 31,2005

2004(in millions of €)

Total

Due after
one year

Total

Due after
one yearPension plans and similar obligations (see Note 25a)

15,482

12,845

13,923

12,634Income and other taxes

3,396

1,166

3,344

1,884Other accrued liabilities (see Note 25b)

27,804

11,839

24,671

8,77146,682

25,850

41,938

23,289


a)     Pension Plans and Similar Obligations

Pension plans and similar obligations are comprised of the following components:

At December 31,(in millions of €)

2005

2004Pension liabilities (pension plans)

5,275

5,606Other postretirement benefits

9,825

8,021Other benefit liabilities

382

29615,482

13,923


The
decrease of the pension liabilities of €0.3 billion resulted primarily from the transfer of the Group's Off-Highway pension liabilities to
"Disposal Group Off-Highway, Liabilities Held for Sale" (see Note 10).

The
increase in accrued other postretirement benefits of €1.8 billion resulted mainly from currency exchange rate effects and from the annual increase of the
accruals less payments to beneficiaries.

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).

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.). The funded status of the projected benefit obligations is as follows:

At December 31, 2005

At December 31, 2004(in millions of €)

Total

German
Plans

Non-German
Plans

Total

German
Plans

Non-German
PlansProjected benefit obligations

41,514

15,163

26,351

34,448

12,628

21,820Less fair value of plan assets

(34,348
)
(10,590
)
(23,758
)
(27,804
)
(9,019
)
(18,785
)Funded status

7,166

4,573

2,593

6,644

3,609

3,035


F-53

---



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

At December 31, 2005

At December 31, 2004(in millions of €)

Total

German
Plans

Non-German
Plans

Total

German
Plans

Non-German
PlansFunded status

7,166

4,573

2,593

6,644

3,609

3,035Amounts not recognized:Unrecognized actuarial net losses

(13,270
)
(5,299
)
(7,971
)
(11,356
)
(4,166
)
(7,190
)Unrecognized prior service cost

(2,470
)
(2
)
(2,468
)
(2,143
)
(2
)
(2,141
)Net assets recognized

(8,574
)
(728
)
(7,846
)
(6,855
)
(559
)
(6,296
)Amounts recognized in the consolidated balance sheets consist of:Prepaid pension cost

(595
)


(595
)
(246
)


(246
)Accrued pension liability

5,275

3,141

2,134

5,606

2,927

2,679Disposal group off-highway, liabilities held for sale

321

321







Intangible assets

(2,375
)


(2,375
)
(2,074
)


(2,074
)Accumulated other comprehensive loss

(11,200
)
(4,190
)
(7,010
)
(10,141
)
(3,486
)
(6,655
)Net assets recognized

(8,574
)
(728
)
(7,846
)
(6,855
)
(559
)
(6,296
)


In
2005 DaimlerChrysler used the rates from the 2005 Heubeck mortality tables G for the valuation of the German pension obligations. Previously, DaimlerChrysler used the rates from 1998
Heubeck mortalitiy tables. The new mortality tables reflect longer living expectation for current employees and lower living expectation for retirees, which resulted in a minor increase of projected
benefit obligations for 2005.

F-54

---



The
development of the projected benefit obligation and the plan assets in 2005 and 2004 is as follows:

At December 31, 2005

At December 31, 2004(in millions of €)

Total

German
Plans

Non-German
Plans

Total

German
Plans

Non-German
PlansChange in projected benefit obligations:Projected benefit obligations at beginning of year

34,448

12,628

21,820

32,132

11,165

20,967Foreign currency exchange rate changes

3,391



3,391

(1,351
)


(1,351
)Service cost

739

296

443

681

256

425Interest cost

1,874

588

1,286

1,878

586

1,292Plan amendments

233



233

67



67Actuarial losses

2,923

2,163

760

2,146

1,110

1,036Acquisitions and other

53

53



852

58

794Settlement / curtailment loss

49



49

134

3

131Benefits paid

(2,196
)
(565
)
(1,631
)
(2,091
)
(550
)
(1,541
)Projected benefit obligations at end of year

41,514

15,163

26,351

34,448

12,628

21,820Change in plan assets:Fair value of plan assets at beginning of year

27,804

9,019

18,785

26,328

8,183

18,145Foreign currency exchange rate changes

3,038



3,038

(1,252
)


(1,252
)Actual return on plan assets

3,951

1,518

2,433

2,854

664

2,190Employer contributions

1,661

534

1,127

1,649

638

1,011Plan participant contributions

18



18

19



19Acquisitions and other







188



188Benefits paid

(2,124
)
(481
)
(1,643
)
(1,982
)
(466
)
(1,516
)Fair value of plan assets at end of year

34,348

10,590

23,758

27,804

9,019

18,785


Plan Assets.At December 31, 2005, 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 pension benefits and administer the plans.
The Group's pension asset allocation at December 31, 2005 and 2004, and target allocation for the year 2006, are presented in the following table:

Plan Assets German Plans

Plan Assets Non-German Plans(in % of plan assets)

2006
planned

2005

2004

2006
planned

2005

2004Equity securities

56

56

56

61

61

61Debt securities

35

36

36

24

25

28Alternative investments

4

2

1

9

7

5Real estate

3

2

2

5

5

4Other

2

4

5

1

2

2


Alternative
investments consist of private equity and debt investments and, beginning in 2005 investments in commodities and hedge funds.

F-55

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Every
3-5 years, or more frequently if appropriate, DaimlerChrysler conducts asset-liability studies for its major pension funds. DaimlerChrysler uses 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 is intended to minimize the economic cost of defined benefit schemes and to limit the risks to an appropriate level.

The
Model Portfolio is then expanded to a medium term Benchmark Portfolio. The Benchmark Portfolio matches the asset class weights in the Model portfolio, but expands the asset classes
by adding of sub-asset-classes with corresponding weights and assigning specific capital market indices to each sub-asset class.

Modern
Portfolio Theory is then applied to determine an optimal one-year target allocation, the performance of which is tracked against the Benchmark Portfolio.

The
entire process is overseen by investment committees which consist of senior financial management from treasury and certain appropriate executives. The investment committees meet
regularly to approve the asset allocations, 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 and high quality government and corporate bonds. To maintain a wide range of diversification and to improve return
opportunities, up to approximately 20% of assets are allocated to private equity, high yield debt, convertible instruments, emerging markets, commodities and hedge funds. Internal controlling units
monitor all investments regularly. External depositary banks provide safekeeping of securities and reporting of transactions and assets.

Assumptions.The measurement date for the Group's pension obligations and plan assets is generally
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 weighted average assumptions were used to determine benefit obligations:

German Plans

Non-German Plans2005

2004

2003

2005

2004

2003(in %)Average assumptions:Discount rate

4.0

4.8

5.3

5.4

5.8

6.2Rate of long-term compensation increase

3.0

3.0

3.0

4.4

4.5

4.5


The
following weighted average assumptions were used to determine net periodic pension cost:

German Plans

Non-German Plans2005

2004

2003

2005

2004

2003(in %)Average assumptions:Discount rate

4.8

5.3

5.8

5.8

6.2

6.7Expected return on plan assets (at the beginning of the year)

7.5

7.5

7.5

8.5

8.5

8.5Rate of long-term compensation increase

3.0

3.0

3.0

4.5

4.5

5.4


Expected Return on Plan Assets.The expected rate of return for German and non-German
plan assets is primarily derived from asset allocation of pension funds and expected future returns for the various asset classes

F-56

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in
portfolios. The investment committees survey banks and large asset portfolio managers about their expectations of future returns of the relevant market indices. The allocation weighted average
return expectations serves an initial indicator for the expected rate of return on plan assets for each pension fund.

In
addition, we consider long-term actual portfolios results and historical market returns in evaluation in order to reflect the long-term character of the
expected rate.

From
January 1, 2003 to December 31, 2005, the expected rate of return was 7.5% and 8.5% for German and non-German plans, respectively. For 2006, the expected
rates of return on plan assets for German and non-German plans are the same as the respective rates used in 2005.

Net Pension Cost.The components of net pension cost were for the years ended December 31,
2005, 2004 and 2003 as follows:

|                               |                                           | 2005   |     | 2004 |     | 2003   |    
|------------------------------ | ----------------------------------------- | ------ | --- | ---- | --- | ------ | ---
|
|(in millions of €)             |                                           |        |     |      |     |        |    
|Service cost                   |                                           | 739    |     | 296  |     | 443    |    
|Interest cost                  |                                           | 1,874  |     | 588  |     | 1,286  |    
|Expected return on plan assets |                                           | (2,377 | )   | (673 | )   | (1,704 | )  
|Amortization of:               |                                           |        |     |      |     |        |    
|                               | Unrecognized net actuarial (gains) losses |        | 600 |      | 183 |        | 417
|                               | Unrecognized prior service cost           |        | 279 |      |    |        | 279
|                               |                                           |        |     |      |     |        |    
|Net periodic pension cost      |                                           | 1,115  |     | 394  |     | 721    |    
|Settlement / curtailment loss  |                                           | 16     |     |     |     | 16     |    
|                               |                                           |        |     |      |     |        |    
|Net pension cost               |                                           | 1,131  |     | 394  |     | 737    |    
|                               |                                           |        |     |      |     |        |    

Contributions.Employer contributions to the Group's defined benefit pension plans
were €1,661 million and €1,649 million for the years ended December 31, 2005 and 2004, respectively. Employer cash contributions to the Group's
defined benefit pension plans are expected to approximate €1.9 billion in 2006, of which €0.5 billion is estimated to be needed to satisfy minimum funding
and contractual requirements and an additional €1.4 billion is expected to be contributed at the Group's discretion.

Estimated Future Pension Benefit Payments.Pension benefits pertaining to the Group's German and
non-German plans were €565 million and €1,631 million, respectively during 2005, and €550 million and
€1,541 million, respectively during 2004. The total estimated future pension benefits to be paid by the Group's pension plans for the next 10 years approximates
€25.4 billion and are expected to be paid as follows:

2006

2007

2008

2009

2010

2011-
2015(in billions of €)German Plans

0.6

0.6

0.6

0.7

0.7

3.9Non-German Plans

1.7

1.8

1.8

1.8

1.9

9.3Total

2.3

2.4

2.4

2.5

2.6

13.2


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Accumulated Benefit Obligation.For all pension plans that have an accumulated benefit obligation in
excess of plan assets, information pertaining to the accumulated benefit obligation and plan assets are presented as follows:

At December 31,

At December 31,

At December 31,2005

2004

2003(in millions of €)Projected benefit obligation

41,099

33,749

31,487Accumulated benefit obligation

39,379

32,627

30,547Plan Assets

33,953

27,141

25,660


The
pretax increase of the minimum pension liability in 2005 resulted in a reduction of stockholder's equity by €170 million (2004:
€1,224 million) and is included in other comprehensive loss.

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.

Funded Status.The funded status of the accumulated postretirement benefit obligations is as follows:

At December 31,2005

2004(in millions of €)Accumulated postretirement benefit obligations

17,711

14,355Less fair value of plan assets

(1,912
)
(1,547
)Funded status

15,799

12,808


A
reconciliation of the funded status to the liability recognized for accrued postretirement health and life insurance benefits in pension plans and similar obligations is as follows:

At December 31,2005

2004(in millions of €)Funded status

15,799

12,808Amounts not recognized:Unrecognized actuarial net losses

(6,189
)
(4,721
)Unrecognized prior service cost

215

(66
)Net liability recognized

9,825

8,021


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---



The
development of the accumulated postretirement benefit obligations and the plan assets in 2005 and 2004 is as follows:

At December 31,2005

2004(in millions of €)Change in accumulated postretirement benefit obligations:Accumulated postretirement benefit obligations at beginning of year

14,355

14,910Foreign currency exchange rate changes

2,280

(1,053
)Service cost

273

255Interest cost

917

863Plan amendments

(289
)
4Actuarial losses

1,004

127Settlement/curtailment loss

15

46Benefits paid

(844
)
(797
)Accumulated postretirement benefit obligations at end of year

17,711

14,355Change in plan assets:Fair value of plan assets at beginning of year

1,547

1,531Foreign currency exchange rate changes

241

(132
)Actual gains (losses) on plan assets

134

160Plan participant contributions

1

Benefits paid

(11
)
(12
)Fair value of plan assets at end of year

1,912

1,547


Plan Assets.At December 31, 2005, 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, 2005 and 2004, and target allocations for 2006 are as follows:

2006
planned

2005

2004(in % of plan assets)Equity securities

65

67

68Debt securities

35

33

32Real estate








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.

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 reflect 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

F-59

---



monitor
all investments regularly. External depositary banks provide safekeeping of securities as well as reporting of transactions and assets.

Estimated Future Subsidies due to Medicare Act.The total estimated future subsidies due to Medicare
Act for the next 10 years approximate €717 million and are expected to be received as follows:

2006

2007

2008

2009

2010

2011-
2015(in millions of €)Medicare Act

53

57

61

65

69

412


Contributions.DaimlerChrysler did not make any contributions to its other postretirement plans in
2005 or 2004 and does not expect to make any contributions in 2006.

Assumptions.The measurement date for the Group's accumulated other postretirement benefit
obligations and plan assets is generally December 31. The measurement date for the Group's net periodic postretirement benefit cost is principally January 1. 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
weighted average assumptions used to determine the benefit obligations of the Group's postretirement benefit plans at December 31 were as follows (in %):

2005

2004

2003Average assumptions:Discount rate

5.7

6.0

6.3Health care inflation rate in following (or "base") year

7.4

8.0

8.0Ultimate health care inflation rate (2011/2011/2008)

5.0

5.0

5.0


The
weighted average assumptions used to determine the net periodic postretirement benefit cost of the Group's postretirement benefit plans were as follows (in %):

2005

2004

2003Average assumptions:Discount rate

6.0

6.3

6.8Expected return on plan assets (at the beginning of the year)

8.5

8.5

8.5Health care inflation rate in following (or "base") year

8.0

8.0

10.0Ultimate health care inflation rate (2011)

5.0

5.0

5.0


U.S.
postretirement benefit plan assets utilize an asset allocation substantially similar to that of the pension assets so the expected rate of return 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. For 2006
the expected rate of return on plan assets is the same as the rate applied in 2005.

F-60

---



The
assumptions 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 ultimate health care cost inflation rates as from 2011:

1-Percentage-
Point
Increase

1-Percentage-
Point
Decrease(in millions of €)Effect on total of service and interest cost components

191

(129
)Effect on accumulated postretirement benefit obligations

2,223

(1,805
)


Net Postretirement Benefit Cost.The components of net periodic postretirement benefit cost for the
years ended December 31, 2005, 2004 and 2003 were as follows:

2005

2004

2003(in millions of €)Service cost

273

255

278Interest cost

917

863

983Expected return on plan assets

(155
)
(159
)
(217
)Amortization of:Unrecognized net actuarial (gains) losses

301

208

220Unrecognized prior service cost

(8
)
3

24Net periodic postretirement benefit cost

1,328

1,170

1,288Settlement/curtailment loss

3

3

2Net postretirement benefit cost

1,331

1,173

1,290


Estimated Future Postretirement Benefit Payments.Postretirement benefits paid pertaining to the
Group's plans were €844 million and €797 million during 2005 and 2004, respectively. The total estimated future postretirement benefits to be paid by the
Group's plans for the next 10 years approximate €11.6 billion and are expected to be paid as follows:

2006

2007

2008

2009

2010

2011-
2015(in billions of €)Expected payments

1.0

1.0

1.1

1.1

1.2

6.2


Prepaid Employee Benefits.In 1996 DaimlerChrysler established a Voluntary Employees' Beneficiary
Association ("VEBA") trust for payment of non-pension employee benefits. At December 31, 2005 and 2004, the VEBA trust had a balance of €2,392 million and
€2,023 million, respectively, of which the long-term assets in the VEBA trust of €1,835 million and €1,474 million,
respectively, are reported as plan assets for the accumulated postretirement benefit obligations and not reported in DaimlerChrysler's Consolidated Balance Sheets. The short-term assets in
the VEBA trust are classified as cash and marketable securities in DaimlerChrysler's Consolidated Balance Sheets. No contributions to the VEBA trust were made in 2005, 2004 and 2003. DaimlerChrysler
does not expect to make any contributions to the VEBA trust in 2006.

F-61

---



b) Other Accrued Liabilities

Other accrued liabilities consisted of the following:

At December 31,2005

2004(in millions of €)Product guarantees

11,632

10,877Accrued sales incentives

5,381

4,680Accrued personnel and social costs

3,219

2,938Derivative financial instruments

1,706

326Other

5,866

5,85027,804

24,671


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 32). 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:

2005

2004(in millions of €)Balance at January 1

10,877

9,230Currency change and change in consolidated companies

767

334Utilizations and transfers

(5,587
)
(4,712
)Product guarantees issued in respective year

5,012

4,807Changes from prior period product guarantees issued

563

1,218Balance at December 31

11,632

10,877


The
amount included in the line item "Product guarantees issued in respective year" represents the additions to the accruals for product guarantees recognized in the corresponding year
for products sold in this year.

In
2005, "Changes from prior period product guarantees issued" are partly offset by payments received from suppliers in settlement of claims for recovery of the costs for recall
campaigns.

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

F-62

---



historical
information. Included in "Deferred income" on the Consolidated Balance Sheets, the deferred revenue from these contracts is summarized as follows:

2005

2004(in millions of €)Balance at January 1

1,115

1,129Currency change and transfers

226

(147
)Deferred revenue current period

694

611Earned revenue current period

(487
)
(478
)Balance at December 31

1,548

1,115


The
provisions for derivative financial instruments are mainly due to exchange rate risks from financial liabilities and future sales revenues. The deviation from previous year is
especially attributable to the changed currency relation of the Euro in relation to the U.S. dollar.

F-63

---



26. Financial Liabilities

|                                                                                                                    |                                      |            |      | At December 31,
|------------------------------------------------------------------------------------------------------------------- | ------------------------------------ | ---------- | ---- | ---------------
|
|(in millions of €)                                                                                                  |                                      |            |      |                
|Short-term:                                                                                                         |                                      |            |      |                
|Notes/Bonds                                                                                                         |                                      |            |      | 12,530         
|Commercial paper                                                                                                    |                                      |            |      | 9,104          
|Liabilities to financial institutions                                                                               |                                      |            |      | 9,860          
|Liabilities to affiliated companies                                                                                 |                                      |            |      | 417            
|Deposits from direct banking business                                                                               |                                      |            |      | 3,045          
|Loans, other financial liabilities                                                                                  |                                      |            |      | 27             
|Liabilities from capital lease and residual value guarantees                                                        |                                      |            |      | 1,500          
|                                                                                                                    |                                      |            |      |                
|Short-term financial liabilities (due within one year)                                                              |                                      |            |      | 36,483         
|                                                                                                                    |                                      |            |      |                
|Long-term:                                                                                                          |                                      | Maturities |      |                
|Notes/Bonds                                                                                                         |                                      | 2007-      |      |                
|                                                                                                                    | of which due in more than five years |            | 2097 |                
|                                                                                                                    | €10,939 (2004: €10,492)              |            |      |                
|Liabilities to financial institutions                                                                               |                                      | 2007-      |      |                
|                                                                                                                    | of which due in more than five years |            | 2019 |                
|                                                                                                                    | €1,469 (2004: €1,265)                |            |      |                
|Liabilities to affiliated companies
of which due in more than five years
€ (2004: €)                              |                                      |            |      | 76             
|Deposits from direct banking business
of which due in more than five years
€9 (2004: €9)                            |                                      |            |      | 160            
|Loans, other financial liabilities
of which due in more than five years
€ (2004: €)                               |                                      |            |      |               
|Liabilities from capital lease and residual value guarantees
of which due in more than five years
€210 (2004: €210) |                                      |            |      | 1,699          
|                                                                                                                    |                                      |            |      |                
|Long-term financial liabilities                                                                                     |                                      |            |      | 44,449         
|                                                                                                                    |                                      |            |      |                
|                                                                                                                    |                                      |            |      | 80,932         
|                                                                                                                    |                                      |            |      |                

Weighted
average interest rates for notes/bonds, commercial paper, liabilities to financial institutions and deposits from direct banking business are 5.70%, 4.08%, 4.54% and 2.24%,
respectively, at December 31, 2005.

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 €2,219 million (2004: €2,232 million).

F-64

---



Aggregate
nominal amounts of financial liabilities maturing during the next five years and thereafter are as follows:

2006

2007

2008

2009

2010

thereafter(in millions of €)Financial liabilities

36,601

13,474

11,760

4,169

2,370

12,482


At
December 31, 2005, the Group had unused short-term credit lines of €7,099 million (2004: €9,278 million) and unused
long-term credit lines of €10,806 million (2004: €8,981 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 to borrow up to $5 billion until
December 2009 and $4.8 billion until December 2010, respectively, 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 May 2006, 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 May 2008. A part of the $18 billion facility serves as back-up for commercial paper
drawings.

27. Trade Liabilities

At December 31, 2005

At December 31, 2004Total

Due after one
and before
five years

Due after
five years

Total

Due after one
and before
five years

Due after
five years(in millions of €)Trade liabilities

14,591

1



12,920

2




28. Other Liabilities

At December 31, 2005

At December 31, 2004Total

Due after one
and before
five years

Due after
five years

Total

Due after one
and before
five years

Due after
five years(in millions of €)Liabilities to affiliated companies

334



224

354

10

Liabilities to related companies

96

5



77



Other liabilities

8,623

260

139

8,314

542

1669,053

265

363

8,745

552

166


As
of December 31, 2005, other liabilities include tax liabilities of €1,147 million (2004: €803 million) and social benefits due of
€808 million (2004: €774 million).

29. Deferred Income

As of December 31, 2005, €3,105 million of the total deferred income is to be recognized after more than one year (2004:
€2,088 million).

F-65

---



Notes to Consolidated Statements of Cash Flows

30. Consolidated Statements of Cash Flows

The following cash flows represent supplemental information with respect to net cash provided by operating activities:

Year ended December 31,2005

2004

2003(in millions of €)Interest paid

3,652

3,092

3,207Income taxes paid

700

1,373

937


For
the year ended December 31, 2005, net cash provided by financing activities included payments / (proceeds) of early terminated cross currency hedges, related to financial
liabilities, of €72 million (2004: €(1,304) million; 2003: €(556) million).

Other Notes

31. Legal Proceedings

Various legal proceedings are pending against the Group. We believe that such proceedings in the main constitute ordinary routine litigation incidental to its
business.

The
official receiver of Garage Bernard Tutrice S.A., France, a former customer of DaimlerChrysler France S.A.S., filed a lawsuit against DaimlerChrysler France in the commercial court
of Versailles in November 2003. The complaint seeks damages of €455 million alleged to have resulted from tax fraud committed by the former Chairman of Tutrice S.A. who
was convicted of tax fraud in April, 2001. In January 2006, the court ordered DaimlerChrysler France to pay €30 million in compensatory damages, and rejected the rest of
the claim.

In
October 2005, DaimlerChrysler Australia/Pacific Pty. Ltd. ("DCAuP") settled the previously reported actions filed in the Supreme Court of New South Wales by National
Australia Bank Limited and the liquidator in connection with the financial failure of a customer. The settlement agreement provides for payment by DCAuP of AUD55 million and a release from all
further claims.

DaimlerChrysler
AG in its capacity as successor of Daimler-Benz AG is a party to a valuation proceeding (Spruchstellenverfahren) relating to a subordination and profit
transfer agreement that existed
between Daimler-Benz AG and the former AEG AG ("AEG"). In 1988, former AEG shareholders filed a petition to the regional court in Frankfurt claiming that the consideration and compensation
stipulated in the agreement was inadequate. In 1994, a court-appointed valuation expert concluded that the consideration provided for in the agreement was adequate. Following a Federal Constitutional
Court decision in an unrelated case, the Frankfurt court in 1999 instructed the expert to employ a market value approach in its valuation analysis rather than the capitalized earnings value approach
previously used. The court also instructed the expert in 2004 to take into account additional findings of the Federal Supreme Court elaborating further on the valuation issue addressed by the Federal
Constitutional Court. In September 2004, the expert delivered the requested valuation opinion. If the new opinion were to be followed by the Frankfurt court, the valuation ratio would increase
significantly in favour of the AEG shareholders. DaimlerChrysler believes the original consideration and compensation to be adequate and the second valuation opinion to be unwarranted. DaimlerChrysler
intends to defend itself vigorously against the claims in this proceeding.

In
1999, former shareholders of Daimler-Benz AG instituted a valuation proceeding (Spruchstellenverfahren) against DaimlerChrysler AG at Stuttgart district court. These
proceedings relate to the merger of Daimler-Benz AG

F-66

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and
DaimlerChrysler AG in connection with the business combination of Daimler-Benz and Chrysler Corporation in 1998. In the course of the merger, 1.8% of all shares in
Daimler-Benz AG were involuntarily exchanged for DaimlerChrysler shares. Some shareholders claim that the ratio used in the course of the merger did not correspond to the actual value of
the Daimler-Benz shares. An expert commissioned by the court presented his report in December 2005. In it, he has calculated various alternative values for payments to be made.
These alternatives range from confirming the appropriateness of the ratio used to considerable payments to be made to the former Daimler-Benz shareholders with respect to the involuntarily
exchanged shares. DaimlerChrysler continues to view the exchange ratio set by the company at the time as appropriate, and the alternative values calculated by the court expert as unfounded. We intend
to continue defending ourselves vigorously against these claims.

Various
legal proceedings are pending against DaimlerChrysler AG or its subsidiaries alleging defects in various components (including occupant restraint systems, seats, brake systems,
tires, ball joints, engines and fuel systems) in several different vehicle models or allege design defects relating to vehicle stability (rollover propensity), pedal misapplication (sudden
acceleration), brakes (vibration and 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 damage to property, personal injuries or wrongful death. Adverse decisions in one or more proceedings
could require DaimlerChrysler or its subsidiaries to pay partially substantial compensatory and punitive damages, or undertake service actions, recall campaigns or other costly actions.

Seven
purported class action lawsuits are pending in various U.S. courts regarding alleged front disc brake judder in 1999-2004 model year Jeep® Grand Cherokee
vehicles and the treatment
of related warranty claims. Plaintiffs seek compensatory and punitive damages, costs of repair or replacement, attorneys' fees and costs.

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.

In
November 2004, a jury awarded $3.75 million in compensatory damages and $98 million in punitive damages against DaimlerChrysler Corporation in Flax v.
DaimlerChrysler Corporation, a case filed in Davidson County Circuit Court in the state of Tennessee. The complaint alleged that the seat back in a 1998 Dodge Grand Caravan was defective and collapsed
when the Caravan was struck by another vehicle resulting in the death of an occupant. In June 2005 the trial court reduced the punitive damage award to $20 million in response to motions
filed by DaimlerChrysler Corporation challenging the verdict and the damage awards. DaimlerChrysler Corporation is appealing the verdict and the damage awards.

In
October 2005, the Arizona Court of Appeals reversed the $50 million punitive damages award and affirmed the $3.75 million compensatory damages award in Douglas v.
DaimlerChrysler Corporation, a case involving the front seat back strength of a 1996 Dodge Ram club cab pickup. DaimlerChrysler Corporation is defending approximately 25 other complaints involving
vehicle seat back strength.

The
U.S. Environmental Protection Agency filed a complaint in the U.S. District Court for the District of Columbia against DaimlerChrysler Corporation in December 2005 alleging
defects in catalytic converters and on-board diagnostic systems in certain Chrysler Group vehicles, and failure to properly disclose defects in such converters. The parties have agreed to
the terms of a consent decree in settlement of the complaint. The settlement requires DaimlerChrysler Corporation to, among other things, extend the warranties on catalytic converters in certain
1996 - 2000 vehicles, and reprogram the powertrain control modules in certain 1996 - 1998 vehicles with updated on-board diagnostic systems
calibrations. DaimlerChrysler Corporation also settled a related parallel

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administrative
proceeding with the California Air Resources Board. The estimated cost of such remedial actions and related settlement payments is approximately $95 million.

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 2005. 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. 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.

A
class action lawsuit was filed in 2002 against Mercedes-Benz USA, LLC ("MBUSA"), and its wholly-owned subsidiary Mercedes-Benz Manhattan, Inc., and is
pending in the United States District Court for the District of New Jersey. The lawsuit alleges that those companies participated in a price fixing conspiracy among Mercedes-Benz dealers.
MBUSA and Mercedes-Benz Manhattan continue to defend themselves vigorously.

DaimlerChrysler
received a "statement of objections" from the European Commission on April 1,1999, which alleged that the Group violated EU 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 EU
competition rules and imposed a fine of approximately €72 million. On September 15, 2005, the Court of First Instance of the European Court of Justice annulled the
decision in part and reduced the fine to an amount of €9.8 million. Neither party appealed the judgment, which is now final.

More
than 80 purported class action lawsuits alleging violations of antitrust law are pending 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.

DaimlerChrysler
Services North America LLC ("DCSNA") settled the two previously reported class action lawsuits alleging racially discriminatory credit practices. The court approved
settlements require, among other things, training programs for employees, consumer financial literacy programs, and community outreach for African-Americans and Hispanics.

The
Federal Republic of Germany has initiated arbitration proceedings against DaimlerChrysler Financial Services AG, Deutsche Telekom AG and Toll Collect GbR. The statement of claims of
the Federal Republic of Germany was received in August 2005. The Federal Republic of Germany is mainly seeking damages, contractual penalties and the transfer of intellectual property rights to
Toll Collect GmbH. In particular, the Federal Republic

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of
Germany is claiming lost revenues of €3.51 billion plus interest (€236 million through July 31, 2005) for the period September 1, 2003,
through December 31, 2004, and contractual penalties of approximately €1.65 billion through July 31, 2005 plus interest (€107 million
through July 31, 2005). Since some of the contractual penalties, among other things, are dependent on time and further claims for contractual penalties have been asserted by the Federal
Republic of Germany, the amount claimed as contractual penalties may increase. DaimlerChrysler believes the claims of the Federal Republic of Germany are without merit and intends to defend itself
vigorously against these claims.

Freightliner
LLC acquired in September 2000 Western Star Trucks Holdings Ltd. Prior to its acquisition by Freightliner, Western Star had completed the sale of a truck
manufacturer, ERF (Holdings) plc, to MAN AG for CAD195 million. In September 2002, MAN filed a claim against Freightliner Ltd. (formerly Western Star) with the London Commercial
Court for fraud and breach of representations and warranties in the share purchase agreement, alleging that ERF's accounts and financial statements were misstated and seeking damages in excess of
GBP300 million. Freightliner Ltd. subsequently filed a contribution claim with that court against Ernst & Young, ERF's and Western Star's auditors. In October 2005, the
court ruled that Freightliner Ltd. was vicariously liable for fraud by an employee of ERF in connection with the preparation of ERF's financial accounts, and also found in favor of
Ernst & Young on the contribution claim. Freightliner Ltd. has appealed both decisions on liability. In December 2005, the court awarded MAN an interim payment of
GBP250 million, based on a minimum estimate of the parties, which amount significantly exceeds Freightliner Ltd.'s net assets. A hearing to determine final damages may be deferred until
resolution of the appeals. In a related matter, MAN sued Freightliner LLC in February 2005 alleging that assets were fraudulently transferred from Freightliner Ltd. while the above
described proceeding was pending, and seeking payment from Freightliner LLC of the damages awarded against Freightliner Ltd. in that proceeding. The complaint, which was amended in
December 2005, is pending in Multnomah County Circuit Court in the state of Oregon. Freightliner LLC intends to defend itself vigorously in this matter.

Tracinda
Corporation filed a lawsuit in 2000 against DaimlerChrysler AG and some of the members of its Supervisory Board and Board of Management alleging 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. On April 7, 2005, the
United States District Court for the District of Delaware rendered a judgment in favor of the defendants and against Tracinda Corporation on all claims finding that there had been no fraud and no
violation of U.S. securities laws. Tracinda is appealing the decision and filed its opening brief with the United States Court of Appeals for the Third Circuit in January 2006.

A
purported class action was filed against DaimlerChrysler AG and some members of its Board of Management in 2004 in the United States District Court for the District of Delaware on
behalf of current or former DaimlerChrysler shareholders who are neither citizens nor residents of the United States and who acquired their DaimlerChrysler shares on or through a foreign stock
exchange. On January 24, 2006, the Court granted DaimlerChrysler's motion to dismiss the complaint, declining to exercise jurisdiction over the case. The complaint, which had not yet been
served on any member of DaimlerChrysler's Board of Management, contained allegations similar to those in the Tracinda complaint and the prior class action complaint. On February 17, 2006, the
plaintiffs filed a notice of appeal of this decision to the United States Court of Appeals for the Third Circuit.

Several
lawsuits, including putative class action lawsuits, were filed in 2002 against a large number of companies from a wide variety of industries and nationalities asserting claims
relating to the practice of apartheid in South Africa. One of the lawsuits names DaimlerChrysler AG as a defendant and another one names a U.S. subsidiary of DaimlerChrysler AG as a defendant. The
lawsuits were consolidated in the United States District Court for the Southern District of New York for pretrial purposes. On November 29, 2004, the Court granted a motion to dismiss filed by
a group of defendants, including DaimlerChrysler. Plaintiffs filed notices of appeal of the Court's decision. The appeal has now been fully briefed. Oral argument was held in January 2006.

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In August 2004, the U.S. Securities and Exchange Commission ("SEC") opened a formal investigation into possible violations by DaimlerChrysler of the
anti-bribery, record-keeping and internal control provisions of the U.S. Foreign Corrupt Practices Act ("FCPA"). The U.S. Department of Justice ("DOJ") has also requested information in
this regard. DaimlerChrysler is voluntarily sharing with the DOJ and the SEC information from its own internal investigation of certain accounts, transactions and payments, primarily relating to
transactions involving government entities, and is providing the agencies with information pursuant to outstanding subpoenas and other requests. Following is a summary of information DaimlerChrysler
uncovered to date in connection with its internal investigation. Further issues may arise as the company completes its investigation.

DaimlerChrysler
determined that improper payments were made in a number of jurisdictions, primarily in Africa, Asia and Eastern Europe. These payments raise concerns under
the U.S. FCPA, German law, and the laws of other jurisdictions.

In
connection with its internal investigation, DaimlerChrysler has identified and self-reported potential tax liabilities to tax authorities in several
jurisdictions. These tax liabilities of DaimlerChrysler AG and certain foreign affiliates result from misclassifications of, or the failure to record, commissions and other payments and expenses.

DaimlerChrysler
determined that certain payable accounts related to consolidated subsidiaries were not eliminated during consolidation.

DaimlerChrysler
is taking action to address and resolve the issues identified in the course of our investigation to safeguard against the recurrence of improper conduct.
This includes evaluating and revising its governance policies and internal control procedures.

In
connection with these issues, DaimlerChrysler recognized charges in its 2005 consolidated statement of income to correct misstatements relating to the years 2003 and 2004 which had
the effect of reducing 2005 operating profit by €16 million and reducing 2005 net income by €64 million.
In addition, DaimlerChrysler adjusted stockholders' equity as at January 1, 2003 to correct accumulated misstatements in the periods 1994 through 2002 which had the effect of reducing the
January 1, 2003 balance of stockholders' equity by €222 million. DaimlerChrysler recognized a charge of €125 million in the third quarter of 2005
with respect to tax liabilities that had been identified in the course of the internal investigation by the date the unaudited interim financial statements for the third quarter 2005 were issued.
Following its continued investigation of the misstatements discussed above, DaimlerChrysler subsequently determined that any adjustments for pre-2003 periods should be reflected in the
January 1, 2003 balance of stockholders' equity. Accordingly, DaimlerChrysler reversed €100 million of the €125 million charge originally
recognized in the third quarter 2005. This amount is reflected in the €222 million reduction of the January 1, 2003 balance of stockholders' equity.

DaimlerChrysler's
internal investigation into possible violations of law is ongoing. If the DOJ or the SEC determines that violations of U.S. law have occurred, it could seek criminal or
civil sanctions, including monetary penalties, against DaimlerChrysler and certain of its employees, as well as additional changes to its business practices and compliance programs.

DaimlerChrysler
also determined that for a number of years a portion of the taxes related to compensation paid to expatriate employees was not properly reported. In connection with this
underpayment of taxes, DaimlerChrysler recognized charges in its 2005 consolidated statement of income to correct corresponding overstatements relating to the years 2003 and 2004 which had the effect
of reducing 2005 operating profit by €34 million and reducing 2005 net income by €25 million. In addition, DaimlerChrysler adjusted stockholders' equity
as at January 1, 2003 to correct accumulated overstatements of net income in the periods 1994 through 2002 which had the effect of reducing the January 1, 2003 balance of stockholders'
equity by €84 million.

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DaimlerChrysler
voluntarily reported potential tax liabilities resulting from these issues to the tax authorities in several jurisdictions.

In
November 2004, the SEC issued a formal order of investigation concerning 13 named participants in the United Nations Oil-for-Food Program seeking to
determine whether there had been acts in violation of the provisions of the Securities Exchange Act of 1934 requiring the maintenance of books, records and accounts, the maintenance of internal
accounting controls and prohibiting specified payments to foreign officials for improper purposes. In July 2005, the SEC supplemented the formal order of investigation to add DaimlerChrysler to
the list of named companies. In that regard, DaimlerChrysler received an order from the SEC to provide a written statement and to produce certain documents regarding transactions in that Program.
DaimlerChrysler is responding to the SEC's request. The DOJ has also requested information in this regard. In addition, the United Nations Independent Inquiry Committee ("IIC") that investigated the
administration and management of the United Nations Oil-for-Food Program asked DaimlerChrysler to provide assistance in the IIC's evaluation of certain transactions under that
Program. On
October 27, 2005, the IIC issued its final report on the United Nations Oil-for-Food Program, which includes a narrative describing DaimlerChrysler's alleged conduct
during the Program. In its report, the IIC concludes that DaimlerChrysler knowingly made or caused to be made a kickback payment of approximately €6,950 to the former Government of
Iraq, that a DaimlerChrysler employee signed two side agreements to make additional payments, and that this conduct was in contravention of Program rules and the United Nations sanctions against Iraq.
It is possible that additional payments may be identified as a result of the ongoing SEC and DOJ investigations. If the DOJ or the SEC determines that violations of U.S. law have occurred, it could
seek criminal or civil sanctions, including monetary penalties, against DaimlerChrysler and certain of its employees.

The
BaFin (German Federal Financial Supervisory Authority) is investigating whether DaimlerChrysler AG's public ad hoc disclosure on July 28, 2005 that Professor Schrempp will
leave the company at the end of 2005 was timely. If the BaFin determines that the company improperly filed such disclosure, it could fine DaimlerChrysler up to €1 million. In a
related matter, the District Attorney's Office in Stuttgart closed the previously reported investigation of alleged insider trading in DaimlerChrysler shares by two DaimlerChrysler senior executives
prior to the ad hoc disclosure. In January 2006 the District Attorney's Office also opened an investigation of alleged insider tipping by the Chairman of our Supervisory Board in advance of
such disclosure. In February 2006, shareholders of DaimlerChrysler who claim damages based on the alleged unduly delayed ad hoc disclosure filed an application for a model case pursuant to
German law (KapMuG).

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.

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32. Contingent Obligations and Commercial Commitments

Contingent Obligations.Obligations from issuing guarantees as a guarantor (excluding product warranties) are as
follows:

At December 31,
Maximum potential future obligations

At December 31,
Amount recognized
as a liability(in millions of €)

2005

2004

2005

2004Guarantees for third party liabilities

1,819

2,653

412

486Guarantees under buy-back commitments

1,499

1,646

406

536Other contingent obligations

249

273

125

1783,567

4,572

943

1,200


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 terms under these arrangements generally
cover 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, 2005, these guarantees amounted to €54.0 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.

DaimlerChrysler
AG provides a guarantee to Deutsche Bank AG to cover the obligations of employees that are participating in its corporate credit card program for corporate travel
expenses which is operated by Deutsche Bank AG. To date, DaimlerChrysler has not incurred any significant payments from that guarantee which amounted to €651 million as of
December 31, 2004. In March 2005, DaimlerChrysler AG and Deutsche Bank AG concluded an additional agreement that supplements the existing framework agreement, limiting the guarantee for
current and future credit card obligations arising from that program to €20 million.

Guarantees
under buy-back commitments principally represent arrangements whereby the Group guarantees specified trade-in or resale 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, partially also
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.

Other
contingent obligations principally include 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.

DaimlerChrysler
AG and its wholly owned subsidiary DaimlerChrysler Financial Services AG have provided various guarantees towards third parties with respect to the investment in Toll
Collect. See Note 3 for detailed information regarding Toll Collect including the guarantees issued. Of the guarantees mentioned in Note 3, only the €600 million
guarantee for the bank loan is reflected in the above table in the line "Guarantees for third party

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liabilities".
The other guarantees are not reflected in the above table since the maximum potential future obligation resulting from the remaining guarantees cannot be accurately estimated. Accruals
established in this regard are also not included in the above table.

When
circumstances indicate that payment is probable and the amount is reasonably estimable, guarantees made by the Group are recognized as a liability in the consolidated balance sheet
in accordance with SFAS 5 "Accounting for Contingencies", with an offsetting amount recorded as an expense (contingent obligation). For guarantees issued or modified after December 31, 2002,
the Group records guarantees at fair value, unless a higher amount must be accrued for in accordance with SFAS 5 (non-contingent obligations). Both
contingent obligations and non-contingent obligations are included in the column "Amount recognized as a liability" in the table above.

In
accordance with FIN 45, the obligations associated with product warranties are not reflected in the above table. See Note 25b for accruals relating to such obligations.

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 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, 2005,
commitments to purchase outsourced manufactured parts and components or to invest in plant and equipment are approximately €10.1 billion. These amounts are not reflected in the
above table.

Collins &
Aikman Corporation ("C&A"), a major tier one supplier to the automotive industry, initiated bankruptcy reorganization proceedings in the U.S. and similar proceedings in
England. During 2005, DaimlerChrysler Corporation, along with other major customers of C&A, agreed to provide price increases and financing to C&A. DaimlerChrysler's portion of the 2005 price
increases and funding commitment was $120 million and is included in cost of sales on the accompanying consolidated statements of income (loss). DaimlerChrysler agreed to provide an additional
$70 million of price increases for calendar year 2006. DaimlerChrysler also agreed to accelerate payments for tooling and to fund other DaimlerChrysler program specific capital expenditures in
2005 and 2006, as well as to fund launch costs as needed throughout 2005. In addition, DaimlerChrysler also provided financial support of €13 million in Europe in 2005 to
support the continuation of component deliveries, to finance specific investments and to secure launch costs.

DaimlerChrysler
would be significantly adversely affected in the near term by a sudden and prolonged interruption in the supply of components from C&A. Such an interruption would affect
production of nearly all Chrysler Group vehicles as well as the Mercedes Car Group's M-Class and R-Class vehicles in Alabama, and all Commercial Vehicle Division vans in
Europe. It would also delay the launch of future vehicle projects in our Vans business unit.

The
Group also enters into noncancellable operating leases for facilities, plant and equipment. Total rentals under operating leases charged to expense in 2005 in the statement of income
amounted to €946 million (2004: €902 million; 2003: €747 million). Future minimum lease payments under noncancellable lease
agreements as of December 31, 2005 are as follows:

(in millions of €)

2006

2007

2008

2009

2010

thereafterOperating leases

805

588

401

344

304

1,134


Future
payments to be received from the subleasing of these facilities, plant and equipment to third parties total €297 million.

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In
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 holds a call option for the
City's interest in DCLRH, exercisable on or after January 1, 2005, and the City of Hamburg holds a put option 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. Upon exercise of either option, the City
of Hamburg would have received a minimum consideration of its interest in DCLRH of €450 million in cash or shares of EADS or a combination of both. The agreement was amended in
July 2004 with respect to the exercise price of the put option, so that the City of Hamburg may only put its interest in DCLRH to the Group for €450 million in cash. As a
consideration for the amendment, the City of Hamburg is entitled to receive an additional payment upon execution of the option equal to 10% of the appreciation of EADS shares in excess of a share
price of €21 up to a share price of €26.

33. Information about Financial Instruments and Derivatives

The
Group conducts business on a global basis in numerous international currencies and is therefore exposed to fluctuations 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 money market investments, variable-and fixed-interest bearing securities, and
to a lesser extent, equity securities for managing excess liquidity 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. In addition, equity investments in publicly traded companies also expose the Group to equity price risk, which, if deemed
appropriate, DaimlerChrysler hedges through the use of derivative financial instruments. Without these derivative financial instruments the Group's exposure to these 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 of financial instruments.

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.

DaimlerChrysler
is also exposed to market price risks associated with the purchase of commodities. To a minor degree, DaimlerChrysler uses derivative instruments to reduce market price
risks, primarily with respect to precious metals. The risk resulting from derivative commodity instruments is not significant to the Group and thus not included in the following discussion.

The
contract volumes at December 31 of derivative financial instruments used for hedging currency- and interest rate risks are shown in the table below. The contract or notional
amounts shown do not always represent

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amounts
exchanged by the parties and are not necessarily a measure for the exposure of DaimlerChrysler through its use of derivatives.

At December 31,2005

2004(in millions of €)Currency contracts

25,082

20,226Interest rate contracts

42,407

38,313


The
fair value of a financial instrument is the price at which one party would assume the rights and/or duties of another party pertaining to such instrument. The fair values of
financial instruments have been determined with reference to market information available 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.

The
carrying amounts and fair values of the Group's financial instruments are as follows:

At December 31, 2005

At December 31, 2004Carrying amount

Fair value

Carrying amount

Fair value(in millions of €)Financial instruments (other than derivative instruments):Assets:Financial assets

1,361

1,361

1,610

1,610Receivables from financial services

61,101

61,246

56,785

57,558Securities

4,936

4,936

3,884

3,884Cash and cash equivalents

7,711

7,711

7,782

7,782Liabilities:Financial liabilities

80,932

82,129

76,270

78,244Derivative instruments:Assets:Currency contracts

181

181

1,287

1,287Interest rate contracts

546

546

2,667

2,667Equity contracts

73

73

90

90Liabilities:Currency contracts

646

646

152

152Interest rate contracts

867

867

196

196Equity contracts

209

209

65

65


Derivative
instruments representing assets are included in other assets (see Note 19) at fair value, while derivative instruments representing liabilities are included in other
accrued liabilities (see Note 25b) at fair value.

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 are determined using quoted market prices. The Group has certain equity
investments in related and affiliated companies which are not presented in the table since they are not publicly traded and determination of fair values is impracticable. In addition, equity

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investments
in associated companies are also not considered in this presentation. For a presentation of the carrying amount and fair value of EADS, the most significant investment of DaimlerChrysler
in associated companies, please refer to Note 3.

Receivables from Financial Services.The carrying amounts of variable rate finance receivables approximate their fair values since the
contract rates of those receivables approximate current market rates. The fair values
of fixed rate finance receivables were determined by discounting expected cash flows, using the current interest rates at which comparable loans with identical maturity could be borrowed as of
December 31, 2005 and 2004.

Cash and Other assets.The carrying amounts of Cash and Other assets approximate fair values due to the short-term maturities
of these instruments.

Financial Liabilities.The fair value of publicly traded debt was determined using quoted market prices. The fair values of other
long-term bonds were determined 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 based on quoted market prices or option pricing models.

Interest Rate Contracts.The fair values of instruments to hedge interest rate risks (e. g. interest rate swap agreements, cross currency
interest rate swap agreements) were determined by discounting expected cash flows, using market interest rates over the remaining term of the instrument. Interest rate options are valued based on
quoted market prices or option pricing models.

Equity Contracts.The fair values of instruments to hedge equity price risk were determined on the basis of quoted market prices or option
pricing models.

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 counterparty's financial strength. Based on the rating of the counterparties performed by established rating
agencies, DaimlerChrysler does not have a significant exposure to any individual counterparty. DaimlerChrysler Financial 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.

The
income or expense arising from the Group's financial instruments (other than derivative instruments), is recognized in financial income, net, with the exception of receivables from
financial services and financial liabilities related to leasing and sales financing activities. 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 corresponding captions.

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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 and other world currencies against the euro. 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. The Mercedes Car
Group segment is primarily exposed to such risk. The Mercedes Car Group 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 indirectly exposed to transaction risk through its equity investment in
EADS, which is accounted for using the equity method.

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. The Currency
Committee consists of members of senior management from Corporate Treasury, each of the operating businesses as well as from Risk Controlling. Corporate Treasury implements the 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 business which is operated by DaimlerChrysler Financial 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.

Excess
liquidity invested in equity securities and the corresponding risks of derivative financial hedging instruments for equities were not material to the Group in the reporting
periods presented. To a certain extent, the equity price risk from investments in publicly traded companies is hedged through derivative financial instruments.

Fair Value Hedges.Gains and losses from fluctuations in the fair value of recognized assets and liabilities and firm commitments of
operating transactions as well as gains and losses arising from derivative financial instruments designated as fair value hedges of these recognized assets and liabilities and firm commitments are

F-77

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recognized
currently in revenues or cost of sales, if the transactions being hedged involve sales (including the leasing and sales financing business) or production of the Group's products. When the
hedged items are recognized in financial income, net, net gains and losses from fluctuations in the 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 also recognized in financial income, net.

For
the year ended December 31, 2005, net losses of €58 million (2004: net losses of €49 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.

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 loss. These amounts are subsequently reclassified into operating income in the same period 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 loss. These amounts are subsequently reclassified into the income statement as a yield adjustment in the same period in which the related interest on the
floating-rate debt obligations affect earnings. If the interest sensitive hedged items affect operating income (including the leasing and sales financing business), the effects from the
hedging instruments are also recognized in operating income. If the interest sensitive hedged items affect financial income, net, the corresponding effects from the hedging instruments are likewise
classified in financial income, net.

For
the year ended December 31, 2005, €41 million losses (2004: losses of €6 million), 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.

During
2005, DaimlerChrysler recorded expenses of €1 million as a result of the discontinuance of cash flow hedges (2004: no gains and losses were recorded).

It
is anticipated that €90 million of net gains included in accumulated other comprehensive loss at December 31, 2005, will be reclassified into earnings
during the next year.

As
of December 31, 2005, DaimlerChrysler held derivative financial instruments with a maximum maturity of 27 months to hedge its exposure to the variability in future cash
flows from foreign currency forecasted transactions.

Hedges of the Net Investment in a Foreign Operation.In specific circumstances, DaimlerChrysler hedges 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, 2005, net gains of €213 million (2004: €120 million) from hedging the Group's net investment in MMC were reclassified into the
income statement. For further information, also see the discussion in Note 3. In addition, net losses of €8 million from hedging the Group's net investments in foreign
operations were included in the cumulative translation adjustment without affecting DaimlerChrysler's net income in 2004.

34. Retained Interests in Securitized Sold Receivables and Sale of Finance Receivables

DaimlerChrysler uses securitization transactions to improve shareholder returns and diversify its funding sources. In the ordinary course of the business the
Group sells significant portions of its automotive finance receivables to trusts and third-parties entities in "asset-backed securitizations" and "whole loan sales". The

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information
given below relates only to transfers of finance receivables which qualified for de-recognition according to the criteria in SFAS 140.

Description of Securitization Transactions.Asset-backed securitizations ("ABS") involve the sale of financial assets by DaimlerChrysler
to trusts that are Special Purpose Entities ("SPEs"). The SPEs purchase the assets with cash raised through the issuance of beneficial interests (usually debt instruments) to third-party investors.
The sold financial assets consist of retail receivables with an expected average lifetime of several months at the time of the securitization and short-term wholesale receivables which are
securitized using a revolving-period structure. The investors in the beneficial interests have recourse to the assets in the trusts and benefit from credit enhancements, such as overcollateralization.
In a subordinated capacity, the Group retains residual beneficial interests in the sold receivables designed to absorb substantially all credit, prepayment, and interest-rate risk of the
receivables transferred to the trusts. The retained interest balance represents DaimlerChrysler's right to receive collections on the transferred receivables in excess of amounts required by the trust
to pay interest and principal to investors, servicing fees, and other required payments. To support the European ABS-program DaimlerChrysler also provided a subordinated loan to one trust.
The Group's maximum exposure to loss as a result of its involvement with these entities is limited to the amount of the carrying value of retained interests and the provided subordinated loan.

The
Group also transfers automotive finance receivables to third-party trusts in transactions wherein it does not retain a beneficial interest in the transferred receivables (whole loan
sales). In whole loan sales, all risk of loss related to the sold receivables is transferred from DaimlerChrysler to the purchaser.

The
Group generally remains as servicer for the sold receivables.

Trusts and Third-Party Entities.Trusts sponsored by DaimlerChrysler are considered Qualifying Special Purpose Entities ("QSPEs") under
SFAS 140 and are not consolidated by the Group. The third-party entities are multi-seller and multi-collateralized bank conduits. These trusts are considered to be variable interest entities
("VIEs") under FIN 46R. 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. Although
its interest in these VIEs 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.

Assumptions in Measuring the Retained Interests and Sensitivity Analysis.At December 31, 2005 and 2004, 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 respective year):

Retail

Wholesale2005

2004

2005

2004Prepayment speed assumption (monthly rate)

1.25%-1.5%

1.5
%
1

1Lifetime (in months)

18

18

3

3Estimated lifetime net credit losses (an average percentage of sold receivables)

1.9%

2.3
%
0.0
%
0.0
%Residual cash flows discount rate (annual rate)

12.0%

12.0
%
12.0
%
12.0
%


---

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Actual and projected net lifetime credit losses for retail receivables securitized were as follows:

Receivables securitized inActual and projected credit losses
Percentages as of2002

2003

2004

2005December 31, 2005

1.8
%
1.6
%
1.8
%
1.9
%December 31, 2004

1.9
%
2.0
%
2.3
%December 31, 2003

2.4
%
2.5
%December 31, 2002

2.6
%


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, 2005.

At
December 31, 2005, 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 adverseAssumption
percentage

10%
change

20%
change(in millions of €)Prepayment speed, monthly

1.5
%
(8
)
(14
)Expected remaining net credit losses as a percentage of receivables sold

0.9
%
(23
)
(45
)Residual cash flow discount rate, annualized

12.0
%
(16
)
(32
)


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
€2 million and €3 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.

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.

Retained Beneficial Interests in Securitized Sold Receivables.As there is no active market for retained interests, the Group determines
the value of its retained interests using discounted cash flow modeling upon the sale of receivables. 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.

For
more details on the valuation of retained interests in securitized sold receivables please see Note 1.

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The
fair value of retained interests in securitized sold receivables was as follows:

At December 31,2005

2004(in millions of €)Fair value of estimated residual cash flows, net of prepayments, from sold receivables, before expected future net credit losses

2,266

2,190Expected future net credit losses on sold receivables

(286
)
(369
)Fair value of net residual cash flows from sold receivables

1,980

1,821Retained subordinated securities

233

379Other retained interests

2

2Retained interests in sold receivables

2,215

2,202


At
December 31, 2005, the Group also recognized a subordinated loan with a carrying value of €25 million to a trust related to the European
ABS-platform.

The
fair value of Retained Interests in sold receivables and the subordinated loan are included in other assets (see Note 19).

Sale of Finance Receivables.During the year ended December 31, 2005, DaimlerChrysler sold in asset-backed securitization
transactions €10,059 million (2004: €9,329 million) and €33,922 million (2004: €35,414 million) of retail
and wholesale receivables, respectively. From these transactions, the Group recognized gains of €11 million (2004: €79 million) and
€169 million (2004: €157 million). During the year ended December 31, 2005, the Group sold €1,516 million (2004:
€965 million) of retail receivables in whole loan sales and recognized gains of €2 million (2004: €14 million). As of
December 31, 2005, the outstanding balance of receivables serviced in connection with whole loan sales was €1,931 million (2004: €1,361 million).

The
cash flows in connection with the mentioned transactions between DaimlerChrysler and the securitization trusts were as follows:

2005

2004(in millions of €)Proceeds from new securitizations

15,093

11,360Proceeds from collections reinvested in previous wholesale securitizations

33,892

35,393Amounts reinvested in previous wholesale securitizations

(33,922
)
(35,414
)Servicing fees received

214

183Receipt of cash flows on retained interests in sold receivables

998

686


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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, 2005 and 2004, respectively, were as follows:

Outstanding
balance at

Delinquencies
> 60 days at

Net credit losses
for the year ended2005

2004

2005

2004

2005

2004(in millions of €)Managed retail receivables

48,216

38,963

111

116

428

390Managed wholesale receivables

18,979

15,142

8

6

6

3Total receivables managed

67,195

54,105

119

122

434

393Less: Retail receivables sold

(14,677
)
(14,287
)
(32
)
(24
)
(155
)
(144
)Less: Wholesale receivables sold

(8,703
)
(5,880
)




(3
)
Total receivables sold

(23,380
)
(20,167
)
(32
)
(24
)
(158
)
(144
)Retail receivables recognized in balance sheets

33,539

24,676

79

92

273

246Wholesale receivables recognized in balance sheets

10,276

9,262

8

6

3

3Receivables recognized in balance sheets

43,815

33,938

87

98

276

249


The
following summarizes the outstanding balance of the receivables sold to the QSPEs and VIEs and the corresponding retained interest balances as of December 31, 2005:

(in millions of €)

Receivables
sold

Retained
interest in sold
receivablesVariable interest entities

3,815

367Qualifying special purpose entities

19,565

1,84823,380

2,215


Servicing Assets and Servicing Liabilities.Servicing assets (Servicing liabilities) represent the
present value derived from retaining the right (obligation) to service securitized receivables compared to adequate servicer compensation. During the year ended December 31, 2005, the Group
recognized servicing assets of €7 million (2004: €1 million) and related amortization of €2 million (2004:
€2 million). The Group also recognized servicing liabilities of €10 million (2004: €8 million) and related amortization of
€13 million (2004: €11 million). At December 31, 2005, the fair value of servicing assets on sold receivables was
€6 million (2004: €1 million), and the fair value of servicing liabilities was €15 million (2004:
€15 million). These values were determined by discounting expected cash flows at current market rates.

Liquidity Facilities of Special Purpose Entities.To support the Group's asset-backed commercial
paper program in North America, a group of financial institutions has provided contractually committed liquidity facilities aggregating $6.2 billion which expire in September 2006, 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, 2005, none of the liquidity facilities have been utilized.

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35. 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.

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, Freightliner, and Mitsubishi and
Fuso.

Financial Services.The activities in this segment primarily extend to the marketing of services
related to financial services (principally retail and lease financing for vehicles and dealer financing) and insurance brokerage. This Segment is also engaged in toll collection. In 2005,
DaimlerChrysler renamed its Services segment to Financial Services, to emphasize its focus on the financial services business.

Other Activities.This segment comprises businesses, operations and investments not allocated to one
of DaimlerChrysler's other business segments. It includes the Group's equity method investment EADS, the business unit DC Off-Highway which is primarily comprised of the MTU-F
Group and the Off-Highway activities of Detroit Diesel Corporation, 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. The Group's equity investment in MMC is included in this segment using the equity method of accounting through
June 29, 2004, and thereafter as an investment in related companies, accounted for at fair value. In November 2005, DaimlerChrysler sold all of its MMC shares (see also Note 3).
Through December 31, 2003, this segment includes the MTU Aero Engines business unit. On December 27, 2005, DaimlerChrysler entered into a share sale and purchase agreement with the
Swedish investor group EQT regarding the sale of a major portion of its Off-Highway Business Unit. The closing is expected to occur in the first quarter of 2006 (see also Note 4).
On January 24, 2006, DaimlerChrysler presented a new management model. As part of the new management model,
DaimlerChrysler intends to change the composition of its business segments by reporting the van and bus business units with its Other Activities. As a result of these changes, the Commercial Vehicles
segment will be renamed the Truck Group.

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), except for revenue recognition
between the automotive business segments and the Services segment in certain markets.

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 gains from the sale of the 12.4% stake in MMC in 2005 and the 10.5% stake in HMC in 2004, impairment of
investment in EADS in 2003, 3) exclude interest and

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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.

Segment
information as of and for the years ended December 31, 2005, 2004 and 2003 follows:

(in millions of €)

Mercedes
Car Group

Chrysler
Group

Commercial
Vehicles

Financial
Services

Other
Activities

Total
Segments

Discontinued
Operations/
Eliminations

Consolidated2005Revenues

46,429

50,086

38,356

12,798

2,107

149,776



149,776Intersegment sales

3,586

32

2,278

2,641

289

8,826

(8,826
)
Total revenues

50,015

50,118

40,634

15,439

2,396

158,602

(8,826
)
149,776Operating Profit (Loss)

(505
)
1,534

2,093

1,468

591

5,181

4

5,185Identifiable segment assets

27,081

55,372

21,712

99,635

29,251

233,051

(31,419
)
201,632Capital expenditures

1,629

3,083

1,743

45

109

6,609

(29
)
6,580Depreciation and amortization

2,418

3,336

1,313

5,757

168

12,992

(381
)
12,6112004Revenues

46,082

49,485

32,940

11,646

1,906

142,059



142,059Intersegment sales

3,548

13

1,824

2,293

294

7,972

(7,972
)
Total revenues

49,630

49,498

34,764

13,939

2,200

150,031

(7,972
)
142,059Operating Profit (Loss)

1,666

1,427

1,332

1,250

456

6,131

(377
)
5,754Identifiable segment assets

26,945

45,869

20,156

88,036

26,526

207,532

(24,660
)
182,872Capital expenditures

2,343

2,647

1,184

91

134

6,399

(13
)
6,386Depreciation and amortization

1,854

3,368

1,058

4,976

164

11,420

(308
)
11,1122003Revenues

48,025

49,321

25,304

11,997

3,723

138,370

(1,933
)
136,437Intersegment sales

3,421



1,502

2,040

361

7,324

(7,324
)
Total revenues

51,446

49,321

26,806

14,037

4,084

145,694

(9,257
)
136,437Operating Profit (Loss)

3,126

(506
)
811

1,240

1,329

6,000

(314
)
5,686Identifiable segment assets

24,199

47,147

14,713

83,239

31,227

200,525

(22,075
)
178,450Capital expenditures

2,939

2,487

958

76

169

6,629

(15
)
6,614Depreciation and amortization

1,789

3,927

890

5,087

196

11,889

(290
)
11,599


Mercedes Car Group.In 2005, the operating profit (loss) of the Mercedes Car Group
segment includes charges of €570 million for the headcount reduction initiative at Mercedes Car Group. Of this amount, €70 million were already cash
effective in 2005 (see Note 5).

An
accrual established in connection with a case alleging infringement of EU competition law was reduced by €60 million as a result of a favorable decision by the
Court of First Instance of the European Court of Justice. This

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amount
is included in selling expenses in the consolidated statement of income and in the operating results of the Mercedes Car Group segment in 2005.

The
operating profit (loss) of the Mercedes Car Group segment for 2005 includes charges of €1,111 million associated with the realignment of the business model for
smart. Thereof €535 million are attributable to impairment charges and write-downs and €576 million are attributable to expected payments in the current
or future periods (see Note 5).

In
2003, operating profit of the Mercedes Car Group includes a non-cash impairment charge amounting to €77 million related to certain
long-lived assets (primarily property, plant and equipment) at a production facility in Brazil.

Chrysler Group.In 2005, the Chrysler Group recorded a €240 million gain on
the sale of its Arizona Proving Grounds vehicle testing facility and a €36 million benefit as a result of adjustments to prior estimates associated with the Chrysler Group
turnaround plan (see also Note 7), which were partially offset by charges of €99 million related to the financial support provided to supplier Collins & Aikman
(see Note 32).

In
2004, the Chrysler Group's operating results were negatively impacted by a €145 million charge related to the turnaround plan, a
€138 million charge for early retirement incentives and other workforce reductions, partially offset by an adjustment of €95 million to correct the
calculation of an advertising accrual to more accurately reflect expected payments.

In
2003, the Chrysler Group's operating results were negatively impacted by a €469 million charge related to the turnaround plan. Also during 2003, the Chrysler
Group and Financial Services segments agreed to an arrangement regarding the sharing of risks associated with the residual values of certain leased vehicles. In addition, the Chrysler Group and
Financial Services segments negotiated reduced pricing on certain retail financing programs offered by the Chrysler Group as sales incentives in 2003. The adjusted pricing reflected the then current
favorable funding environment as well as Financial Services becoming the exclusive provider of selected discount consumer financing for the Chrysler Group. Both arrangements resulted in a favorable
impact of €244 million on the 2003 operating profit of the Chrysler Group, and a corresponding decrease of €244 million on the 2003 operating profit of
Financial Services. Neither arrangement had any effect on the Group's consolidated operating results.

Commercial Vehicles.As discussed in Note 4, on March 18, 2004, DaimlerChrysler
acquired an additional 22% interest in MFTBC from MMC for €394 million in cash, thereby increasing the Group's ownership interest in MFTBC to a controlling 65%. As a result of
the acquisition and first time consolidation of MFTBC in March 2004, the identifiable segment assets of the Commercial Vehicles segment increased by €4.3 billion.

Subsequent
to the acquisition of the controlling interest in MFTBC, a number of quality problems of MFTBC vehicles that were produced before DaimlerChrysler first acquired a stake in
MFTBC were identified (see Note 4 for additional information). As of December 31, 2004, DaimlerChrysler made a true-up based on the preliminary evaluation of the probable
costs associated with the quality measures and recall campaigns at
MFTBC which substantially confirmed the estimates made in the third quarter 2004. Total expenses arising from the recall issues reduced 2004 operating profit of the Commercial Vehicle segment by
€475 million. The reduction in operating profit consisted of €70 million classified as financial income (expense), net, in the Group's 2004 statement of
operations and €735 million classified as cost of sales, net of €330 million attributed to the minority interests' share in those costs. As expenses
attributed to minority interests are not allocated to operating profit, they are included in the line "Miscellaneous items, net" in the reconciliation of total segment operating profit to consolidated
income before income taxes, minority interests, and discontinued operations. The following

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settlement
with MMC associated with the quality issues and recall campaigns at MFTBC resulted in a favorable impact of €276 million, which is included in the operating profit of
the Commercial Vehicles segment in 2005.

Financial Services.In 2005, 2004 and 2003, the Financial Services segment recorded charges of
€54 million, €472 million and €241 million related to the participation in Toll Collect. The charges in 2004 were mainly the result
of revaluing the system's total costs and extra operating expenses required to guarantee the start of the system on January 1, 2005.

In
2004, the operating profit of the Financial Services segment includes non-cash impairment charges of €102 million associated with the investment
made in dAF.

Capital
expenditures for equipment on operating leases for 2005, 2004 and 2003 for the Financial Services segment amounted to €16,055 million,
€13,850 million and €11,631 million, respectively.

With
respect to two agreements entered into in 2003 with the Chrysler Group segment, the 2003 operating profit of Financial Services were unfavorably impacted by
€244 million. See discussion at Chrysler Group above.

Other Activities.In 2005, operating profit of the Other Activities segment includes primarily the
Group's share in the gains of EADS of €757 million (see Note 3). In 2004 and 2003, the proportionate results of the investments in EADS and MMC together amounted to
€548 million and €278 million, respectively. The 2004 amount also included the results from the dilution of the Group's interest in MMC (loss of
€135 million) and related currency hedging effects (gain of €195 million). Due to the loss of significant influence on MMC at June 29, 2004, the
Group's
share in the losses of MMC is only included for the corresponding period (see Note 3 for additional information).

As
a result of the repurchase of a note by MTU Aero Engines Holding AG, a gain of €53 million is included in the operating profit of the Other Activities segment
for 2005 (see Note 6).

At
December 31, 2005, the identifiable assets of the Other Activities segment include €3,564 million related to the carrying values of the investment in
EADS. In 2004 and 2003, the carrying values of the investments in EADS and MMC together amounted to €4,313 million and €4,542 million, respectively.

In
connection with the sale of Adtranz in 2001, a settlement agreement with Bombardier was reached in 2004 with respect to all claims asserted. This settlement resulted in a favorable
impact of €120 million on the 2004 operating profit of the Other Activities segment.

In
addition, the operating profit of 2004 of the Other Activities segment includes non-cash impairment charges of €70 million associated with the
investment made in dAF.

The
2003 operating profit of Other Activities includes a gain of €1,031 million from the sale of MTU Aero Engines. Following the sale transaction, effective
December 31, 2003, MTU Aero Engines' assets and liabilities were deconsolidated. Revenues, operating profit, capital expenditures, and depreciation and amortization of the Other Activities
segment include MTU Aero Engines through December 31, 2003 (see also Notes 4 and 10).

F-86

---



The
reconciliation of total segment operating profit to consolidated income before income taxes, minority interests, discontinued operations and cumulative effects of changes in
accounting principles is as follows:

(in millions of €)

2005

2004

2003Total segment operating profit

5,181

6,131

6,000Elimination and consolidation amounts

4

(377
)
(314
)Total Group operating profit

5,185

5,754

5,686Pension and postretirement benefit expenses, other than current and prior service costs and settlement/curtailment losses

(1,175
)
(845
)
(870
)Gain from the sale of the 12.4% stake in MMC

681



Gain from the sale of the 10.5% stake in HMC



252

Impairment of investment in EADS





(1,960
)Interest and similar income

539

490

521Interest and similar expenses

(1,112
)
(790
)
(911
)Other financial income (loss), net

(69
)
(171
)
35Miscellaneous items, net

(149
)
(384
)
(308
)Pre-tax income from discontinued operations, adjusted to exclude or include the above reconciling items





(84
)Pre-tax income on disposal of discontinued operations





(1,031
)The Group's share of the above reconciling items included in the net losses of investments accounted for at equity

(462
)
(771
)
(482
)Consolidated income before income taxes, minority interests, cumulative effects of changes in accounting principles and discontinued operations

3,438

3,535

596


Revenues
from external customers presented by geographic region are as follows:

(in millions of €)

Germany

Western
Europe1

United States

Other
American
countries

Asia

Other
countries

Discontinued
operations

Consolidated2005

20,948

26,389

67,015

13,919

12,525

8,980



149,7762004

22,315

26,530

64,232

11,295

10,093

7,594



142,0592003

24,182

26,975

64,757

10,399

6,786

5,271

(1,933
)
136,437


---

Germany accounts for €20,682 million of long-lived assets (2004: €21,209 million; 2003:
€21,164 million), the United States for €44,007 million (2004: €35,250 million; 2003: €36,430 million) and
other countries for €17,716 million (2004: €15,982 million; 2003: €13,102 million).

F-87

---



36. 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 31,2005

2004

2003(in millions of € or millions of shares, except earnings (loss) per share)Income (loss) from continuing operations  basic

2,851

2,466

(418
)Interest expense on convertible bonds and notes (net of tax)





Income (loss) from continuing operations  diluted

2,851

2,466

(418
)Weighted average number of shares outstanding  basic

1,014.7

1,012.8

1,012.7Dilutive effect of stock options in 2005 and 2004

3.0

1.7

Weighted average number of shares outstanding  diluted

1,017.7

1,014.5

1,012.7Earnings (loss) per share from continuing operationsBasic

2.80

2.43

(0.41
)Diluted

2.80

2.43

(0.41
)


Because
the Group reported a loss from continuing operations for the year ended December 31, 2003 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 the weighted average number of shares outstanding would have
potentially been diluted by 0.5 million shares resulting from the conversion of bonds and notes.

Stock
options to acquire 65.7 million, 67.1 million and 71.6 million DaimlerChrysler Ordinary Shares that were issued in connection with the 2000 Stock Option Plan
were not included in the computation of diluted earnings (loss) per share for 2005, 2004 and 2003, respectively, because the options' underlying exercise prices were higher than the average market
prices of DaimlerChrysler Ordinary Shares in these periods.

37. Related Party Transactions

The Group purchases materials, supplies and services from numerous suppliers throughout the world in the ordinary course of its business. These suppliers include
companies in which the Group holds an ownership interest and companies that are affiliated with some members of DaimlerChrysler AG's Supervisory Board or Board of Management.

In
recent years, DaimlerChrysler initiated several cooperation projects with MMC. In November 2005, DaimlerChrysler sold its remaining 12.4% interest in MMC. Current cooperation
projects will not be affected by the sale, and will continue as previously agreed. Examples of such projects are the joint development and production of engines, the shared use of vehicle architecture
and the joint production of passenger cars, sports utility vehicles and pickup trucks in Europe, North America, China and South Africa.

DaimlerChrysler
has an agreement with McLaren Cars Ltd., a wholly owned subsidiary of McLaren Group Ltd., for the production of the Mercedes McLaren super sports car, which
DaimlerChrysler launched into the markets in 2004. The Group owns a 40% equity interest in McLaren Group Ltd.

As
described in more detail in Note 3, DaimlerChrysler provides a number of guarantees with respect to Toll Collect, a joint venture in which DaimlerChrysler holds an equity
interest of 45%. Mr. Bernhard Walter, a member

F-88

---



of
the Supervisory Board of DaimlerChrysler AG, is also a member of the Supervisory Board of Deutsche Telekom AG, one of the other investors in Toll Collect.

In
2003, DaimlerChrysler sold 60% of its equity interest in Mercedes-Benz Lenkungen GmbH to ThyssenKrupp Automotive AG. Since then, DaimlerChrysler accounted 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 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. As described in Note 4, DaimlerChrysler sold its remaining 40% equity interest in the
company to ThyssenKrupp Automotive AG. The Group continues to purchase products from this company.

In
May 2002, our wholly owned subsidiary DaimlerChrysler Corporation ("DCC") sold its Dayton Thermal Products Plant to Behr Dayton, a joint venture company with Behr
America Inc. As of May 1, 2004, DCC sold its remaining minority interest in the joint venture to Behr America Inc. DCC is required to purchase products from the former joint
venture at competitively-based prices under a supply agreement entered into in connection with the sale. 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.

In
2004, 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 €1 million.

DaimlerChrysler
engages in commercial transactions negotiated at arms length with its equity investee EADS. DaimlerChrysler does not consider these transactions to be material to us
either individually or in the aggregate. Mr. Lagardère, a member of the Supervisory Board of DaimlerChrysler AG, is also one of two chairmen of the board of directors of EADS.

From
time to time, DaimlerChrysler Group companies may purchase goods and services (primarily advertising) from, and sell or lease vehicles or provide financial services to,
Lagardère Group companies in the ordinary course. Mr. Lagardère is the general partner and chief executive officer of their ultimate parent company,
Lagardère SCA, a publicly traded company.

The following represent transactions with shareholders.DaimlerChrysler incurred expenses of approximately
$800,000 in 2005 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.

In
July 2005, DCC and Haden Prism LLC ("Haden") entered into an agreement under which Haden will construct and operate a vehicle paint facility within the Chrysler Group's
manufacturing complex in Toledo, Ohio, as part of a supplier co-location project scheduled to begin operation in 2006. Haden is an indirect subsidiary of Haden International
Group, Inc., which is 75% owned by Palladium Equity Partners ("Palladium"), a private investment firm with investments in several other companies. Robert J. Lanigan, a member of the Supervisory
Board of DaimlerChrysler AG, is a partner and an investor in Palladium.

DaimlerChrysler
Canada Inc. paid CAD1.2 million to a subsidiary of Mosaic Sales Solutions Holding Company for field marketing services pursuant to a competitively bid
contract awarded in April 2005. The chief executive officer of the subsidiary, Tony LaSorda, is the brother of Thomas LaSorda, a member of the Board of Management of DaimlerChrysler AG who
assumed responsibility for the Chrysler Group in September 2005.

F-89

---



During
2005, Deutsche Bank AG reduced its 11.8% share ownership as of December 31, 2004, and now holds less than 5% of our 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. DaimlerChrysler also guarantees the obligations of its employees under
the company's 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, which
amounted to €651 million as of December 31, 2004, was reduced to €20 million during 2005. DaimlerChrysler so far has not incurred any major
payments to Deutsche Bank AG from that guarantee.

On
July 7, 2004, DaimlerChrysler entered into a securities lending agreement with Deutsche Bank AG concerning 22,227,478 of its shares in EADS (approximately 3% of the voting
stock). As collateral, DaimlerChrysler received a lien on a securities account of equivalent value as the shares loaned by DaimlerChrysler.

38. Compensation of the Members of the Board of Management and the Supervisory Board and
       Further Additional Information Concerning German Corporate Governance Code

Compensation.The total compensation paid by Group related companies to the members of the Board of Management of
DaimlerChrysler AG is calculated from the amount of compensation paid in cash and from benefits in kind.

Thereof
€9.3 million account for fixed, €24.6 million for short-term and mid-term and
€1.0 million for long-term incentive compensation components. This is correspondent to a sum of €34.9 million in 2005.

In
2005, 454,914 phantom shares were granted to the members of the Board of Management from the long-term share-based compensation component. The cash pay-out for
these shares will be effective in 2009 in the event of continuous service on the Board of Management and dependent on the achievement of internal and external goals. The information on the
pay-out will be part of the performance-oriented compensation disclosure for the business year 2009. For detailed information on stock-based compensation programs, see Note 24.

In
2005, stock options granted in 2003 were exercisable. In this context, Members of the Board of Management exercised 167,500 stock options.

Board
of Management Members, whose term of office expired in 2005, were entitled to receive compensation earned before the respective retirement date from current mid-term
and the new 2005 long-term share-based remuneration components calculated on a pro-rata basis. We also had expenditures in connection with certain previously accrued retirement
benefit obligations of other Board of Management Members. The aggregate amount of both items is €23.8 million.

The
aggregate amount of expenditures paid by DaimlerChrysler for the year ended December 31, 2005, to provide pension, retirement and similar benefits for former members of the
board of management and their survivors was €16.9 million. An amount of €292.9 million has been accrued for pension obligations to former members of the
Board of Management and their survivors.

The
compensation paid in 2005 to the members of the Supervisory Board of DaimlerChrysler AG for services in all capacities to the Group amounted to €2.0 million.
The individual compensation paid to the members of the Supervisory Board is disclosed as part of the compensation report in accordance with a recommendation of the German corporate governance code.
Except for the compensation paid to employee representatives within the Supervisory Board in accordance with their contracts of employment, no compensation was paid for services provided personally
beyond the aforementioned Board activities, in particular for advisory or agency services.

As
of December 31, 2005, no advances or loans existed to members of the Board of Management or Supervisory Board of DaimlerChrysler AG.

F-90

---



Transactions with Related Parties.For transactions with related parties, which are shareholders of
DaimlerChrysler AG, see the last section of Note 37.

Third Party Companies.At December 31, 2005, DaimlerChrysler was shareholder of a significant
company, that meet the criteria of a third party company according German Corporate Governance Codex:

Name of the company

Tata Motors LimitedHeadquarters

Mumbai, IndiaStake in %1

6.8Equity in millions of €2

828Net income in millions of €2

253


---

39. Principal Accountant Fees and Services

The fees, billed by the independent auditors KPMG for professional services in 2005, 2004 and 2003 are comprised of:

Year ended December 31,(in millions of €)

2005

2004

2003Audit fees

42

39

34Audit-related fees

11

14

7Tax fees

5

6

6All other fees

4

5

362

64

50


40. 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 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-91

---





|2005
(in millions of €)                              |                                                                    | DaimlerChrysler AG (parent company)        |         | DaimlerChrysler North America Holding |        | Other subsidiaries (combined) |          | Consolidating adjustments |          | DaimlerChrysler AG (consolidated) |         
|---------------------------------------------------- | ------------------------------------------------------------------ | ------------------------------------------ | ------- | ------------------------------------- | ------ | ----------------------------- | -------- | ------------------------- | -------- | --------------------------------- | --------
|Assets                                               |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                                     |                                                                    | Goodwill and other intangible assets       |         | 83                                    |        |                              |          | 4,989                     |          |                                  |         
|                                                     |                                                                    | Property, plant and equipment, net         |         | 7,500                                 |        |                              |          | 29,244                    |          | (5                                | )       
|                                                     |                                                                    | Investments and long-term financial assets |         | 33,424                                |        | 51,346                        |          | 11,968                    |          | (90,382                           | )       
|                                                     |                                                                    | Equipment on operating leases, net         |         | 5,279                                 |        |                              |          | 29,264                    |          | (305                              | )       
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                                     | Fixed assets                                                       |                                            | 46,286  |                                       | 51,346 |                               | 75,465   |                           | (90,692  | )                                 | 82,405  
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                                     |                                                                    | Inventories                                |         | 6,065                                 |        |                              |          | 14,203                    |          | (1,129                            | )       
|                                                     |                                                                    | Trade, finance and other receivables       |         | 14,446                                |        | 1,271                         |          | 78,559                    |          | (16,849                           | )       
|                                                     |                                                                    | Securities                                 |         | 1,853                                 |        | 1,656                         |          | 1,427                     |          |                                  |         
|                                                     |                                                                    | Cash and cash equivalents                  |         | 297                                   |        | 4,955                         |          | 2,459                     |          |                                  |         
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                                     | Non-fixed assets                                                   |                                            | 22,661  |                                       | 7,882  |                               | 96,648   |                           | (17,978  | )                                 | 109,213 
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                                     | Deferred taxes and prepaid expenses                                |                                            | 3,525   |                                       |       |                               | 9,280    |                           | (4,165   | )                                 | 8,640   
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                                     | Disposal group Off-Highway, assets held for sale                   |                                            |        |                                       |       |                               | 1,478    |                           | (104     | )                                 | 1,374   
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                                     | Total assets                                                       |                                            | 72,472  |                                       | 59,228 |                               | 182,871  |                           | (112,939 | )                                 | 201,632 
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|Liabilities and stockholders' equity                 |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                                     | Stockholders' equity                                               |                                            | 36,449  |                                       | 14,718 |                               | 69,913   |                           | (84,631  | )                                 | 36,449  
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                                     | Minority interests                                                 |                                            |        |                                       |       |                               | 653      |                           |         |                                   | 653     
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                                     | Accrued liabilities                                                |                                            | 12,501  |                                       | 627    |                               | 33,702   |                           | (148     | )                                 | 46,682  
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                                     |                                                                    | Financial liabilities                      |         | 14,401                                |        | 42,486                        |          | 43,148                    |          | (19,103                           | )       
|                                                     |                                                                    | Trade liabilities                          |         | 3,943                                 |        |                              |          | 10,648                    |          |                                  |         
|                                                     |                                                                    | Other liabilities                          |         | 2,432                                 |        | 1,316                         |          | 9,195                     |          | (3,890                            | )       
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                                     | Liabilities                                                        |                                            | 20,776  |                                       | 43,802 |                               | 62,991   |                           | (22,993  | )                                 | 104,576 
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                                     | Deferred taxes and deferred income                                 |                                            | 2,746   |                                       | 81     |                               | 14,792   |                           | (5,118   | )                                 | 12,501  
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                                     | Disposal group Off-Highway, liabilities held for sale              |                                            |        |                                       |       |                               | 820      |                           | (49      | )                                 | 771     
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                                     | Total liabilities                                                  |                                            | 36,023  |                                       | 44,510 |                               | 112,958  |                           | (28,308  | )                                 | 165,183 
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                                     | Total liabilities and stockholders' equity                         |                                            | 72,472  |                                       | 59,228 |                               | 182,871  |                           | (112,939 | )                                 | 201,632 
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                                     | Revenues                                                           |                                            | 59,188  |                                       |       |                               | 134,315  |                           | (43,727  | )                                 | 149,776 
|                                                     | Cost of sales                                                      |                                            | (49,810 | )                                     |       |                               | (114,263 | )                         | 41,179   |                                   | (122,894
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|Gross margin                                         |                                                                    | 9,378                                      |         |                                      |        | 20,052                        |          | (2,548                    | )        | 26,882                            |         
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                                     | Selling, administrative and other expenses                         |                                            | (7,424  | )                                     | (12    | )                             | (13,077  | )                         | 1,529    |                                   | (18,984 
|                                                     | Research and development                                           |                                            | (2,960  | )                                     |       |                               | (2,799   | )                         | 110      |                                   | (5,649  
|                                                     | Other income                                                       |                                            | 761     |                                       |       |                               | 1,165    |                           | (960     | )                                 | 966     
|                                                     | Goodwill impairment                                                |                                            |        |                                       |       |                               | (30      | )                         |         |                                   | (30     
|                                                     | Turnaround plan  Chrysler Group                                   |                                            |        |                                       |       |                               | 36       |                           |         |                                   | 36      
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|Income (loss) before financial income                |                                                                    | (245                                       | )       | (12                                   | )      | 5,347                         |          | (1,869                    | )        | 3,221                             |         
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                                     | Financial income (expense), net                                    |                                            | 3,021   |                                       | 895    |                               | 8        |                           | (3,707   | )                                 | 217     
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|Income (loss) before income taxes                    |                                                                    | 2,776                                      |         | 883                                   |        | 5,355                         |          | (5,576                    | )        | 3,438                             |         
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                                     | Income taxes                                                       |                                            | 71      |                                       | 736    |                               | (1,363   | )                         | 43       |                                   | (513    
|                                                     | Minority interests                                                 |                                            |        |                                       |       |                               | (74      | )                         |         |                                   | (74     
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|Income (loss) from continuing operations             |                                                                    | 2,847                                      |         | 1,619                                 |        | 3,918                         |          | (5,533                    | )        | 2,851                             |         
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                                     | Income from discontinued operations                                |                                            |        |                                       |       |                               |         |                           |         |                                   |        
|                                                     | Cumulative effects of changes in accounting principle              |                                            | (1      | )                                     |       |                               | (4       | )                         |         |                                   | (5      
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|Net income (loss)                                    |                                                                    | 2,846                                      |         | 1,619                                 |        | 3,914                         |          | (5,533                    | )        | 2,846                             |         
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|Cash provided by (used for) operating activities     |                                                                    | 1,360                                      |         | (530                                  | )      | 9,407                         |          | 2,116                     |          | 12,353                            |         
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|Increase in equipment on operating leases            |                                                                    | (3,225                                     | )       |                                      |        | (17,305                       | )        | 294                       |          | (20,236                           | )       
|                                                     | Purchases of property, plant, equipment and other fixed assets     |                                            | (2,083  | )                                     |       |                               | (4,769   | )                         |         |                                   | (6,852  
|                                                     | Proceeds from disposals of equipment on operating leases leases    |                                            | 2,729   |                                       |       |                               | 8,914    |                           |         |                                   | 11,643  
|                                                     | Proceeds from disposals of fixed assets                            |                                            | 141     |                                       |       |                               | 957      |                           |         |                                   | 1,098   
|                                                     | Payments for investments in businesses                             |                                            | (811    | )                                     |       |                               | (774     | )                         | 1,033    |                                   | (552    
|                                                     | Proceeds from disposals of businesses                              |                                            | 422     |                                       |       |                               | 1,127    |                           | (1,033   | )                                 | 516     
|                                                     | (Increase) decrease in receivables from financial services, net    |                                            | (165    | )                                     |       |                               | 3,057    |                           | 2        |                                   | 2,894   
|                                                     | Disposition (acquisitions) of securities (other than trading), net |                                            | 1,063   |                                       | (1,121 | )                             | 310      |                           |         |                                   | 252     
|                                                     | Other                                                              |                                            | (205    | )                                     | 4,742  |                               | (1,043   | )                         | (3,479   | )                                 | 15      
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|Cash used for investing activities                   |                                                                    | (2,134                                     | )       | 3,621                                 |        | (9,526                        | )        | (3,183                    | )        | (11,222                           | )       
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                                     | Change in financial liabilities                                    |                                            | 346     |                                       | (1,101 | )                             | 2,078    |                           | (1,461   | )                                 | (138    
|                                                     | Dividends paid                                                     |                                            | (1,519  | )                                     | (884   | )                             | (3,309   | )                         | 4,137    |                                   | (1,575  
|                                                     | Other                                                              |                                            | 200     |                                       |       |                               | 1,609    |                           | (1,609   | )                                 | 200     
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|Cash provided by (used for) financing activities     |                                                                    | (973                                       | )       | (1,985                                | )      | 378                           |          | 1,067                     |          | (1,513                            | )       
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|Effect of foreign exchange rate changes on cash      |                                                                    |                                           |         | 568                                   |        | 52                            |          |                          |          | 620                               |         
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|Net increase (decrease) in cash and cash equivalents |                                                                    | (1,747                                     | )       | 1,674                                 |        | 311                           |          |                          |          | 238                               |         
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|Cash and cash equivalents                            |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                                     | At beginning of period                                             |                                            | 2,044   |                                       | 3,281  |                               | 2,056    |                           |         |                                   | 7,381   
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         
|                                                     | At end of period                                                   |                                            | 297     |                                       | 4,955  |                               | 2,367    |                           |         |                                   | 7,619   
|                                                     |                                                                    |                                            |         |                                       |        |                               |          |                           |          |                                   |         

F-92

---





|2004
(in millions of €)                              |                                                                    | DaimlerChrysler AG (parent company)        |        | DaimlerChrysler North America Holding |        | Other subsidiaries (combined) |         | Consolidating adjustments |          | DaimlerChrysler AG (consolidated) |        
|---------------------------------------------------- | ------------------------------------------------------------------ | ------------------------------------------ | ------ | ------------------------------------- | ------ | ----------------------------- | ------- | ------------------------- | -------- | --------------------------------- | -------
|Assets                                               |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|                                                     |                                                                    | Goodwill and other intangible assets       |        | 97                                    |        |                              |         | 4,577                     |          |                                  |        
|                                                     |                                                                    | Property, plant and equipment, net         |        | 7,130                                 |        |                              |         | 26,897                    |          | (10                               | )      
|                                                     |                                                                    | Investments and long-term financial assets |        | 30,170                                |        | 45,891                        |         | 10,464                    |          | (79,486                           | )      
|                                                     |                                                                    | Equipment on operating leases, net         |        | 4,955                                 |        |                              |         | 22,013                    |          | (257                              | )      
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|                                                     | Fixed assets                                                       |                                            | 42,352 |                                       | 45,891 |                               | 63,951  |                           | (79,753  | )                                 | 72,441 
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|                                                     |                                                                    | Inventories                                |        | 6,395                                 |        |                              |         | 11,236                    |          | (826                              | )      
|                                                     |                                                                    | Trade, finance and other receivables       |        | 11,166                                |        | 3,968                         |         | 75,829                    |          | (14,246                           | )      
|                                                     |                                                                    | Securities                                 |        | 1,951                                 |        | 410                           |         | 1,523                     |          |                                  |        
|                                                     |                                                                    | Cash and cash equivalents                  |        | 2,409                                 |        | 3,281                         |         | 2,092                     |          |                                  |        
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|                                                     | Non-fixed assets                                                   |                                            | 21,921 |                                       | 7,659  |                               | 90,680  |                           | (15,072  | )                                 | 105,188
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|                                                     | Deferred taxes and prepaid expenses                                |                                            | 2,076  |                                       | 8      |                               | 9,312   |                           | (6,153   | )                                 | 5,243  
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|                                                     | Total assets                                                       |                                            | 66,349 |                                       | 53,558 |                               | 163,943 |                           | (100,978 | )                                 | 182,872
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|Liabilities and stockholders' equity                 |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|                                                     | Stockholders' equity                                               |                                            | 33,338 |                                       | 11,961 |                               | 63,435  |                           | (75,212  | )                                 | 33,522 
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|                                                     | Minority interests                                                 |                                            |       |                                       |       |                               | 909     |                           |         |                                   | 909    
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|                                                     | Accrued liabilities                                                |                                            | 10,824 |                                       | 135    |                               | 31,118  |                           | (139     | )                                 | 41,938 
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|                                                     |                                                                    | Financial liabilities                      |        | 14,054                                |        | 41,066                        |         | 37,255                    |          | (16,105                           | )      
|                                                     |                                                                    | Trade liabilities                          |        | 4,206                                 |        |                              |         | 8,714                     |          |                                  |        
|                                                     |                                                                    | Other liabilities                          |        | 1,680                                 |        | 149                           |         | 9,571                     |          | (2,655                            | )      
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|                                                     | Liabilities                                                        |                                            | 19,940 |                                       | 41,215 |                               | 55,540  |                           | (18,760  | )                                 | 97,935 
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|                                                     | Deferred taxes and deferred income                                 |                                            | 2,247  |                                       | 247    |                               | 12,941  |                           | (6,867   | )                                 | 8,568  
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|                                                     | Total liabilities                                                  |                                            | 33,011 |                                       | 41,597 |                               | 100,508 |                           | (25,766  | )                                 | 149,350
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|                                                     | Total liabilities and stockholders' equity                         |                                            | 66,349 |                                       | 53,558 |                               | 163,943 |                           | (100,978 | )                                 | 182,872
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|                                                     |                                                                    | Revenues                                   |        | 56,553                                |        |                              |         | 125,089                   |          | (39,583                           | )      
|                                                     |                                                                    | Cost of sales                              |        | (46,000                               | )      |                              |         | (105,691                  | )        | 37,124                            |        
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|Gross margin                                         |                                                                    | 10,553                                     |        |                                      |        | 19,398                        |         | (2,459                    | )        | 27,492                            |        
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|                                                     |                                                                    | Selling, administrative and other expenses |        | (6,995                                | )      | (12                           | )       | (12,458                   | )        | 1,493                             |        
|                                                     |                                                                    | Research and development                   |        | (3,179                                | )      |                              |         | (2,581                    | )        | 102                               |        
|                                                     |                                                                    | Other income                               |        | 748                                   |        |                              |         | 824                       |          | (677                              | )      
|                                                     |                                                                    | Turnaround plan expenses  Chrysler Group  |        |                                      |        |                              |         | (145                      | )        |                                  |        
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|Income (loss) before financial income                |                                                                    | 1,127                                      |        | (12                                   | )      | 5,038                         |         | (1,541                    | )        | 4,612                             |        
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|                                                     | Financial income (expense), net                                    |                                            | 2,005  |                                       | 1,348  |                               | (416    | )                         | (4,014   | )                                 | (1,077 
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|Income (loss) before income taxes                    |                                                                    | 3,132                                      |        | 1,336                                 |        | 4,622                         |         | (5,555                    | )        | 3,535                             |        
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|                                                     |                                                                    | Income taxes                               |        | (666                                  | )      | 492                           |         | (1,065                    | )        | 62                                |        
|                                                     |                                                                    | Minority interests                         |        |                                      |        |                              |         | 108                       |          |                                  |        
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|Income (loss) from continuing operations             |                                                                    | 2,466                                      |        | 1,828                                 |        | 3,665                         |         | (5,493                    | )        | 2,466                             |        
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|                                                     | Income from discontinued operations                                |                                            |       |                                       |       |                               |        |                           |         |                                   |       
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|Net income (loss)                                    |                                                                    | 2,466                                      |        | 1,828                                 |        | 3,665                         |         | (5,493                    | )        | 2,466                             |        
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|Cash provided by (used for) operating activities     |                                                                    | 3,124                                      |        | (932                                  | )      | 12,034                        |         | (3,166                    | )        | 11,060                            |        
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|                                                     | Increase in equipment on operating leases                          |                                            | (3,278 | )                                     |       |                               | (14,623 | )                         | 223      |                                   | (17,678
|                                                     | Purchases of property, plant, equipment and other fixed assets     |                                            | (2,244 | )                                     |       |                               | (4,658  | )                         | 2        |                                   | (6,900 
|                                                     | Proceeds from disposals of equipment on operating leases leases    |                                            | 2,492  |                                       |       |                               | 7,976   |                           |         |                                   | 10,468 
|                                                     | Proceeds from disposals of fixed assets                            |                                            | 203    |                                       |       |                               | 538     |                           |         |                                   | 741    
|                                                     | Payments for investments in businesses                             |                                            | (465   | )                                     |       |                               | 162     |                           | 39       |                                   | (264   
|                                                     | Proceeds from disposals of businesses                              |                                            | 875    |                                       |       |                               | 382     |                           | (39      | )                                 | 1,218  
|                                                     | (Increase) decrease in receivables from financial services, net    |                                            | 3      |                                       |       |                               | (4,058  | )                         | 599      |                                   | (3,456 
|                                                     | Disposition (acquisitions) of securities (other than trading), net |                                            | (454   | )                                     | (103   | )                             | (173    | )                         |         |                                   | (730   
|                                                     | Other                                                              |                                            | (2,344 | )                                     | (1,691 | )                             | (505    | )                         | 4,459    |                                   | (81    
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|Cash used for investing activities                   |                                                                    | (5,212                                     | )      | (1,794                                | )      | (14,959                       | )       | 5,283                     |          | (16,682                           | )      
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|                                                     | Change in financial liabilities                                    |                                            | 2,927  |                                       | 1,325  |                               | 188     |                           | (344     | )                                 | 4,096  
|                                                     | Dividends paid                                                     |                                            | (1,519 | )                                     |       |                               | (1,952  | )                         | 1,924    |                                   | (1,547 
|                                                     | Other                                                              |                                            |       |                                       |       |                               | 3,697   |                           | (3,697   | )                                 |       
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|Cash provided by (used for) financing activities     |                                                                    | 1,408                                      |        | 1,325                                 |        | 1,933                         |         | (2,117                    | )        | 2,549                             |        
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|Effect of foreign exchange rate changes on cash      |                                                                    |                                           |        | (236                                  | )      | (77                           | )       |                          |          | (313                              | )      
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|Net increase (decrease) in cash and cash equivalents |                                                                    | (680                                       | )      | (1,637                                | )      | (1,069                        | )       |                          |          | (3,386                            | )      
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|Cash and cash equivalents                            |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|                                                     |                                                                    | At beginning of period                     |        | 2,724                                 |        | 4,918                         |         | 3,125                     |          |                                  |        
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        
|                                                     |                                                                    | At end of period                           |        | 2,044                                 |        | 3,281                         |         | 2,056                     |          |                                  |        
|                                                     |                                                                    |                                            |        |                                       |        |                               |         |                           |          |                                   |        

F-93

---



|2003
(in millions of €)                              |                                                                    | DaimlerChrysler AG (parent company)   |         | DaimlerChrysler North America Holding |        | Other subsidiaries (combined) |          | Consolidating adjustments |         | DaimlerChrysler AG (consolidated) |         
|---------------------------------------------------- | ------------------------------------------------------------------ | ------------------------------------- | ------- | ------------------------------------- | ------ | ----------------------------- | -------- | ------------------------- | ------- | --------------------------------- | --------
|                                                     | Revenues                                                           |                                       | 56,248  |                                       |       |                               | 117,777  |                           | (37,588 | )                                 | 136,437 
|                                                     | Cost of sales                                                      |                                       | (44,808 | )                                     |       |                               | (100,369 | )                         | 35,251  |                                   | (109,926
|                                                     |                                                                    |                                       |         |                                       |        |                               |          |                           |         |                                   |         
|Gross margin                                         |                                                                    | 11,440                                |         |                                      |        | 17,408                        |          | (2,337                    | )       | 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                                   | )      | 3,784                         |          | (1,618                    | )       | 3,412                             |         
|                                                     |                                                                    |                                       |         |                                       |        |                               |          |                           |         |                                   |         
|                                                     |                                                                    | Impairment of investment in EADS      |         | (1,960                                | )      |                              |          | (1,960                    | )       | 1,960                             |         
|                                                     |                                                                    | Other financial income (expense), net |         | 1,225                                 |        | 425                           |          | (211                      | )       | (2,295                            | )       
|                                                     |                                                                    |                                       |         |                                       |        |                               |          |                           |         |                                   |         
|                                                     | Financial income (expense), net                                    |                                       | (735    | )                                     | 425    |                               | (2,171   | )                         | (335    | )                                 | (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 principle              |                                       | (30     | )                                     |       |                               | (30      | )                         | 30      |                                   | (30     
|                                                     |                                                                    |                                       |         |                                       |        |                               |          |                           |         |                                   |         
|Net income (loss)                                    |                                                                    | 448                                   |         | 952                                   |        | 1,823                         |          | (2,775                    | )       | 448                               |         
|                                                     |                                                                    |                                       |         |                                       |        |                               |          |                           |         |                                   |         
|Cash provided by (used for) operating activities     |                                                                    | 6,217                                 |         | 891                                   |        | 9,508                         |          | (2,790                    | )       | 13,826                            |         
|                                                     |                                                                    |                                       |         |                                       |        |                               |          |                           |         |                                   |         
|                                                     | 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 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    |                                       |        |                                       |       |                               | (3,580   | )                         | 235     |                                   | (3,345  
|                                                     | 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                   |                                                                    | (4,379                                | )       | (1,295                                | )      | (7,021                        | )        | (913                      | )       | (13,608                           | )       
|                                                     |                                                                    |                                       |         |                                       |        |                               |          |                           |         |                                   |         
|                                                     | 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 equivalents |                                                                    | (376                                  | )       | 936                                   |        | 1,107                         |          |                          |         | 1,667                             |         
|                                                     |                                                                    |                                       |         |                                       |        |                               |          |                           |         |                                   |         
|Cash and cash equivalents                            |                                                                    |                                       |         |                                       |        |                               |          |                           |         |                                   |         
|                                                     |                                                                    | At beginning of period                |         | 3,100                                 |        | 3,982                         |          | 2,018                     |         |                                  |         
|                                                     |                                                                    |                                       |         |                                       |        |                               |          |                           |         |                                   |         
|                                                     |                                                                    | At end of period                      |         | 2,724                                 |        | 4,918                         |          | 3,125                     |         |                                  |         
|                                                     |                                                                    |                                       |         |                                       |        |                               |          |                           |         |                                   |         

F-94

---



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