As filed with the Securities and Exchange Commission on March 3, 2010



SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



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, 2009
Commission file number 1-12356

DAIMLERAG(Exact name of Registrant as specified in its charter)

DAIMLERAG(Translation of Registrant's name into English)

FEDERAL REPUBLIC OF GERMANY(Jurisdiction of incorporation or organization)

MERCEDESSTRASSE 137, 70327 STUTTGART, GERMANY(Address of principal executive offices)

Mr. Robert
Köthner
Daimler AG
Epplestrasse 225
70567 Stuttgart
Germany
011-49-711-17-92543
011-49-711-17-94116 (facsimile)
(Name, address, telephone and facsimile number of company contact person)



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

Title of each class



Name of each exchange
on which registeredOrdinary Shares, no par value

Frankfurt Stock Exchange
New York Stock ExchangeGuarantee of the following securities of:Daimler Finance North America LLC8.50% Notes Due January 18, 2031

New York Stock Exchange


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

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

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 . . . . . . . . 1,024,066,951

(as
of December 31, 2009)

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

Yes ý

No o


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 o

No ý


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 ý

No o


Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o

No o


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 ý

Accelerated filer o

Non-accelerated filer o


Indicate
by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.

U.S. GAAP o

International Financial Reporting Standards as issued by
the International Accounting Standards Board ý

Other o


If
"Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 o

Item 18 o


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 o

No ý




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TABLE OF CONTENTS

PagePART IItem 1.

Identity of Directors, Senior Management and Advisers


2Item 2.

Offer Statistics and Expected Timetable


2Item 3.

Key Information


2Selected Financial Data


2Risk Factors


5Item 4.

Information on the Company


13Introduction


13Description of Business Segments


15Mercedes-Benz Cars


15Daimler Trucks


19Mercedes-Benz Vans


23Daimler Buses


25Daimler Financial Services


27Supplies and Raw Materials


29Government Regulation and Environmental Matters


30Description of Property


36Item 4A.

Unresolved Staff Comments


37Item 5.

Operating and Financial Review and Prospects


37Introduction


37New Accounting Pronouncements Not Yet Adopted


39Inflation


39Critical Accounting Policies


39Operating Results


46Information about EBIT


47Overview of Business Segment Revenue and
EBIT


472009 Compared With 2008


482008 Compared With 2007


54Liquidity and Capital Resources


60Off-Balance Sheet Arrangements


68Research and Development


70Item 6.

Directors, Senior Management and Employees


71Supervisory Board


72Board of Management


77Compensation


79Employees and Labor Relations


84Share Ownership


85Item 7.

Major Shareholders and Related Party Transactions


86Item 8.

Financial Information


86Consolidated Financial Statements


86Other Financial Information


87Export Sales


87Legal Proceedings


87Dividend Policy


91Item 9.

The Offer and Listing


92


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PageItem 10.

Additional Information


94Options to Purchase Securities from Registrant or Subsidiaries


94Articles of Incorporation


94Material Contracts


100Exchange Controls


101Taxation


101Documents on Display


105Item 11.

Quantitative and Qualitative Disclosures About Market Risk


105Item 12.

Description of Securities Other than Equity Securities


105PART IIItem 13.

Defaults, Dividend Arrearages and Delinquencies


106Item 14.

Material Modifications to the Rights of Security Holders and Use of Proceeds


106Item 15.

Controls and Procedures


106Item 16A.

Audit Committee Financial Expert


107Item 16B.

Code of Ethics


107Item 16C.

Principal Accountant Fees and Services


107Item 16D.

Exemptions from the Listing Standards for Audit Committees


108Item 16E.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers


108Item 16F.

Change in Registrant's Certifying Accountant


109Item 16G.

Corporate Governance


109PART IIIItem 17.

Financial Statements


112Item 18.

Financial Statements


112Item 19.

Exhibits


112


ii

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Cautionary Statement Regarding Forward-Looking Statements

This document 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," "Daimler," the "Daimler Group" or the "Group" refers to Daimler
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 financial data presented in the table below from our audited consolidated financial statements for the
years ended December 31, 2009, 2008, 2007, 2006, and 2005. We prepared the consolidated financial statements included in this report (Consolidated Financial Statements) in accordance with
International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

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 notes thereto and the discussion in "Item 5. Operating and Financial Review and Prospects."

2

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2009

2008

2007

2006

2005(in millions, except for ordinary share amounts)Income Statement Data:Revenue1

€
78,924

€
98,469

€
101,569

€
99,222

€
95,209Earnings before interest and taxes (EBIT)2


(1,513
)

2,730


8,710


4,992


2,873Net profit (loss) from continuing operations


(2,644
)

1,704


4,855


3,166


2,253Net profit (loss) from discontinued operations





(290
)

(870
)

617


1,962Net profit (loss)


(2,644
)

1,414


3,985


3,783


4,215Profit (loss) attributable to shareholders of Daimler AG


(2,640
)

1,348


3,979


3,744


4,149Earnings (loss) per share for profit (loss) attributable to shareholders of Daimler AGBasicNet profit (loss) from continuing operations


(2.63
)

1.71


4.67


3.06


2.16Net profit (loss) from discontinued operations





(0.30
)

(0.84
)

0.60


1.93Net profit (loss)


(2.63
)

1.41


3.83


3.66


4.09DilutedNet profit (loss) from continuing operations


(2.63
)

1.70


4.63


3.04


2.15Net profit (loss) from discontinued operations





(0.30
)

(0.83
)

0.60


1.93Net profit (loss)


(2.63
)

1.40


3.80


3.64


4.08Balance Sheet Data (end of period):Total assets

€
128,821

€
132,225

€
135,094

€
217,634

€
228,012Non-current liabilities


49,456


47,313


47,998


90,452


96,823Current liabilities


47,538


52,182


48,866


89,836


95,232Share capital


3,045


2,768


2,766


2,673


2,647Equity attributable to shareholders ofDaimler AG


30,261


31,222


36,718


36,925


35,545Equity


31,827


32,730


38,230


37,346


35,957




2009

2008

2007

2006

2005Other Data:Weighted average number of shares outstandingBasic


1,003.8


957.7


1,037.8


1,022.1


1,014.7Diluted


1,003.8


959.9


1,047.3


1,027.3


1,017.7Dividend per share (euro)



3

0.60


2.00


1.50


1.50Dividend per share (U.S. dollar)4



3

0.77


3.17


2.00


1.81


1In
May 2008, the IASB published Improvements to IFRSs (International Financial Reporting Standards). One of the changes introduced by the 2008 improvements is an amendment to
IAS 16 "Property, Plant and Equipment" regarding the presentation of the de-recognition of assets held for rental. Pursuant to this amendment, proceeds from sales of assets held for
rental that occur in the ordinary course of activities must be recognized as revenue. We have applied the revised standard since January 1, 2009 and the 2009 figures in the above table reflect
the new presentation. We also adjusted the 2008 and 2007 figures to make them comparable. Revenue and cost of sales recognized in the 2009 consolidated statements of income (loss) increased by
€2,706 million and €2,706 million, respectively, as a result of this change in presentation (2008 increases: €2,596 million and
€2,596 million, respectively; 2007 increases: €2,170 million and €2,170 million, respectively). The 2006 and 2005 figures are
unchanged since the information necessary for an adjustment was not readily available. See also Note 1 to the Consolidated Financial Statements.2EBIT
includes expenses from compounding of provisions (2009: €1,003 million; 2008: €429 million; 2007:
€444 million; 2006: €418 million; 2005: €350 million).3Daimler
AG will not pay a dividend for the 2009 financial year. Please also refer to the discussion under the heading "Dividend Policy" in "Item 8. Financial Information."4The
U.S. dollar dividend amounts for prior years reflect the dividend amounts in euros as approved by our stockholders at the annual general meeting for the respective year, translated
at the Deutsche Bank fixing rate for the U.S. dollar on the day following such approval.


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Year

High

Low(in US$ per €)2010January


1.4536


1.38702009December


1.5100


1.4243November


1.5085


1.4658October


1.5029


1.4532September


1.4795


1.4235August


1.4416


1.4075Average12009





1.39552008





1.46952007





1.37972006





1.26612005





1.2400


1This
column shows the average of the noon buying rates on the last business day of each month during the relevant year.




On February 16, 2010, the noon buying rate for €1 was US$1.3742.

Fluctuations
in the exchange rate between the euro and the U.S. dollar affect the market price of our ordinary shares on the New York Stock Exchange and the U.S. dollar amount received
by shareholders who elect to convert cash dividends declared in euros into U.S. dollars. Please refer to "Item 5. Operating and Financial Review and Prospects," "Item 11. Quantitative
and Qualitative Disclosures About Market Risk" and Note 30 to our Consolidated Financial Statements for information on how exchange rate fluctuations affect our businesses and operations and
how we manage our exposure to those fluctuations.

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RISK FACTORS

Many factors could affect our business, 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. The principal risks are described below.



A lack of continued improvement in global economic conditions or a relapse into recession in any of the major
world economies could have significant adverse effects on our business and our future operating results and cash flows.

In
the aftermath of the financial crisis that began in the second half of 2008 in the United States, the world economy in 2009 experienced the worst recession since the Second World War
and the Great Depression. Despite a moderate recovery in the second half of 2009, the global economy remains fragile because of a continued tightness in the credit markets and unpredictable consumer
demand and investment activity, especially in the United States and Western Europe. If the economic recovery in those regions or in other key markets in which we operate does not continue or stagnates
or if the economies of key industrialized countries fall back into recession, our financial condition, our profitability and our cash flows would be adversely affected.

In
an environment of a highly fragile global economy, the occurrence of any events that threaten consumer and investor confidence generally (for example, international disputes,
political instability, terrorism, volatility in equity or housing markets, rising energy prices, or inefficient financial market regulations) may exacerbate any adverse effects of the global economy
on future sales, primarily in Western Europe, the United States and in some emerging markets. Since a high proportion of our costs are fixed, even small declines in sales can significantly affect our
operating results and cash flows.

In
connection with the crisis in the financial markets and its impact on the global economy, central banks and governments in the industrialized nations injected vast amounts of
additional liquidity into the economy through credit and financial market support programs and increased government spending. These steps resulted in a significant increase in the monetary base and
significantly higher fiscal deficits. Central banks appear to recognize that they must reduce the excess liquidity before one or more of the risks typically associated with excess market liquidity
materialize. Similarly, governments are aware that they must address the significantly higher public debt ratios, either by increasing revenue or through budget cuts. If public spending is reduced too
early or too quickly, however, the fragile economic recovery could be in danger. Conversely, if central banks and governments do not take timely and decisive steps to reduce excess liquidity and reign
in government spending, inflation rates may increase significantly, thereby increasing the risk of creating new pricing "bubbles" in some market sectors and hampering future commercial and consumer
spending and investment. If any of these potential developments materialize, demand for our passenger cars and commercial vehicles would likely decline, thereby negatively affecting our profitability
and cash flows. Similarly, if severe deflation were to occur in some of our key markets, our business, future operating results and cash flows would be adversely affected.

A renewed decline in consumer demand and investment activity or a prolonged economic stagnation in Western Europe, the most important market for our products,
could significantly adversely affect our businesses.

We
derive approximately half our revenue from our business in Western Europe. In 2009, the global recession had a significant negative affect on the Western European economies, resulting
in significantly reduced demand for consumer goods and capital equipment. Even though sales of passenger cars were aided by government-sponsored car-scrap incentives, these incentives
primarily benefited the compact and micro-compact car segments and had virtually no slowing effect on the sales declines in the luxury car segment. At year end 2009, the major Western European
economies began to show signs of modest improvement, although overall demand remains substantially lower compared to pre-recession levels. A relapse into recession or a prolonged
stagnation in the Western European economies or in the industries in which we operate could result in a further

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decline
in consumer demand and investment activity. Such a decline could be exacerbated by a prolonged continuation or worsening of the tight credit markets, resulting in lower consumer and investor
confidence. In some Western European countries, for example in Germany, the economic effect of restrictions in the credit markets may be even more pronounced since small and medium sized companies,
which depend on readily available bank loans, represent a significant portion of total economic activity in those countries. If any of these risks materialize, sales of our passenger cars and
commercial vehicles in Western Europe could experience significant declines, thereby adversely affecting our profitability and cash flows.

Our
business in Western Europe could be further impacted if business conditions deteriorate due to the structural weakness of some European economies, the spillover effects of a renewed
weakness in other major economies or a further significant appreciation of the euro.

A continuation or worsening of the tightness of the credit markets in the U.S. could result in a renewed decline in demand for consumer products and capital
investment, which could affect our sales of automotive products in the U.S., and potentially other markets, as well as our profitability and cash flows.

The
United States is an important market for our products. Despite a modest recovery in the second half of 2009, the U.S. economy continues to experience tight credit markets, negatively
affecting consumer spending and capital investment. In 2010, U.S. credit markets also may be adversely affected by a rise in defaults on consumer and commercial loans. Vast fiscal stimulus packages
and a rising money supply have increased further the risk of a potential future economic downturn, potentially giving rise to a renewed decline in investment and private consumption in the U.S. Any of
these developments could negatively affect sales of our passenger cars and commercial vehicles in the U.S. market and our profitability and cash flows.

In
addition, the U.S. economy continues to require significant capital inflow from non-U.S. investors to finance the current account deficit. A renewed decline in demand for
U.S. dollar denominated investments (which could also be caused by considerable shifts of global currency reserve portfolios) could lead to a further and uncontrolled depreciation of the U.S. dollar,
which would adversely affect our currency transaction risk, thereby negatively impacting our passenger car sales into the U.S. and the profitability of our Mercedes-Benz Cars segment.
Because of the global importance of the U.S. economy and the existing interdependencies between the United States economy and other major economies throughout the world, any renewed significant
economic downturn in the United States would likely also adversely affect Western European and other world markets.

A sustained slowdown or economic downturn in Asian economies could delay our plans for expansion in Asian markets and intensify competitive
pressures.

During
2009, the major Asian economies remained relatively stable compared to the U.S. and Western European economies, primarily as a result of solid economic growth in China and India.
In China, vast fiscal stimulus packages and a rising money and credit supply have increased the risk of a potential future economic downturn. A significant decline in economic activity in these
countries or in other major Asian economies could negatively affect the future business prospects of our subsidiary Mitsubishi Fuso Truck and Bus Corporation and sales of our Mercedes-Benz
passenger cars in that region. An economic downturn in Asia, particularly in China or India, could also delay our long-term strategic expansion plans in those increasingly important
markets. Moreover, if economic conditions in Asia were to deteriorate, especially if coupled with depreciating Asian currencies, then Asian competitors with excess capacity might 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.

Our results of operations and cash flows could be adversely affected by economic or political change in some regions.

We,
in particular our Daimler Trucks segment, our Daimler Buses segment, and our Daimler Financial Services segment, have significant operations in several Latin American countries and
in Turkey. Some of these countries may experience severe economic or political change, including currency fluctuations, social unrest or

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instability
in the governance regime, which could adversely affect our investments as well as local demand in those and neighboring countries, thereby negatively affecting our cash flows and results
of operations.

In
addition, a substantial decline in raw material prices could have a significant adverse effect on the economic outlook of some emerging markets, for example, Russia and Brazil, whose
economic growth depends to a large degree on exports of raw materials. As a result, our capital investments and sales of our automotive products in those countries could be negatively affected.

Protectionist trade policies could negatively affect our business in several markets.

Demand
for motor vehicles could also be affected by adverse developments in 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, production 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 Asia.



Overcapacity and intense competition in the automotive industry create pricing pressure and could force further
cost reductions which could negatively affect our profitability and cash flows.

Overcapacity
and intense price competition in the automotive industry could continue to force manufacturers of passenger cars and commercial vehicles, including us, to decrease
production, reduce production capacity or increase sales incentives, each of which would be costly and therefore could negatively affect our profitability and cash flows. For example, the global
economic slowdown that began towards the end of 2008 and continued into 2009 has caused a significant decline in demand for passenger cars and commercial vehicles in many geographic markets, which
further increased overcapacity and intensified price competition in the automotive industry. If the weakness of the automotive markets continues, additional capacity adjustments or pricing measures
could become necessary. In that regard, the discontinuation of the government-sponsored
car-scrap and other incentives offered in certain Western European countries in 2009 could have an overall chilling effect on those automobile markets in 2010, potentially resulting in a
significant decline in future passenger car sales. Even though in Western Europe the primary beneficiaries of those incentives were the compact and micro compact car market segments, there can be no
assurance that any decline would be limited to those product segments.

Our
ability to improve or even maintain our profitability depends, among other things, on maintaining competitive cost structures and introducing attractive and fuel efficient new
products. If we are unable to continue to provide competitive pricing, customers may elect to purchase competitors' products and our future profitability and cash flows may suffer. For example, some
U.S. vehicle manufacturers received financial support from government sources or emerged from reorganization proceedings with a lower cost base, thereby enabling these manufacturers to improve their
profitability or offer their products at lower prices.

In
addition, significant discounts and other sales incentives have become increasingly common in many automotive markets, including Western Europe, also as a consequence of the
government sponsored car-scrap bonus programs. 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.

A permanent shift in consumer preference could limit our ability to sell our traditional product lines at current volume levels and affect our profitability in
general.

In
the recent past, there were indications in several geographic markets that consumer preference may have begun to shift towards smaller, more fuel efficient and environmentally
friendly vehicles. A general shift in consumer preference toward those vehicles could negatively affect our ability to sell large or medium size luxury passenger cars at current volume levels. As a
result, we may be forced to lower prices or increase sales incentives

7

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on
these products. Both, lower volume sales and lower prices could have a negative effect on our future financial condition, operating results and cash flows. In addition, we may be forced to adjust
production capacity and further increase efficiency, which could result in significant additional costs, thereby negatively affecting our results of operations and cash flows. Conversely, if we are
unable to adjust permanently our production capacity and cost structures to changed business conditions, including a permanent shift of consumer preference towards smaller, lower margin vehicles, our
profitability and cash flows may be negatively impacted.

The future profitability of our Daimler Trucks segment depends in part on the successful implementation of the business optimization and realignment plans of our
subsidiaries Daimler Trucks North America and Mitsubishi Fuso Truck and Bus Corporation.

In
2008, the board of management of Daimler AG approved a plan to optimize and reposition the business operations of Daimler Trucks North America (DTNA), a wholly-owned subsidiary of the
Group. In addition, in May 2009, our board of management decided on a major realignment of our subsidiary Mitsubishi Fuso Bus and Truck Corporation (MFTBC). The future profitability and cash flows of
our Daimler Trucks segment depend in part on the successful implementation of these plans. For further information on the measures initiated at DTNA and MFTBC, please refer to the discussion under the
heading "Daimler Trucks" in "Item 4. Information on the Company."

A renewed decline of vehicle sales combined with limited credit availability could continue to jeopardize the business viability of our
dealers.

In
2009, the financial viability of our vehicle dealers and importers was significantly affected by the decline in demand for passenger cars and commercial vehicles that resulted from
the global economic downturn and the financial crisis, which resulted in higher refinancing costs and significantly reduced access to credit. A renewed decline of sales of passenger cars or commercial
vehicles or even a stagnation of sales at low post-crisis levels could further jeopardize the business viability of our dealers. Any steps we take to provide financial support to our
dealers or importers could negatively impact our cash flows and profitability.

The pressure on automotive suppliers worldwide, the increased number of suppliers in financial distress or bankruptcy, supplier insolvencies, possible
interruptions in our supply chain, or a renewed increase in commodities prices could negatively impact our profitability and cash flows.

Our
financial performance depends in part on obtaining competitive prices from suppliers and on a reliable supply chain for parts, sub-assemblies and other materials. Our
ability to achieve further price reductions from suppliers may be limited by a combination of factors, including consolidation among automotive suppliers, the limitation of the supply base for certain
components or financial difficulties at automotive suppliers induced by the global economic downturn which continued into 2009.

The
significant declines in vehicle sales as a result of the global economic downturn, exacerbated by the continuing intense competition in the automotive industry, had a significant
adverse effect on the financial position of many of our suppliers, some of which are in financial distress or are the subject of bankruptcy proceedings. In some cases, we have provided or are
providing financial assistance to suppliers in order to avoid prolonged interruption in the supply of parts or components. Providing such assistance also in the future could negatively impact our
profitability and cash flows. Many of our suppliers also supply other automotive manufacturers. If one or more major global automotive manufacturers were to experience severe financial difficulties or
relapse into financial distress, the financial condition of one or more of our suppliers could be significantly adversely affected, which in turn could result in further supplier insolvencies or the
need to provide additional support to those suppliers. A consolidation among automotive suppliers, for example, due to acquisitions or mergers, could limit our ability to negotiate competitive prices
due to reduced competition for certain components. Consistent with general industry practice, we also source select parts or components from a single supplier, which carries a risk of potential
production disruption if the supplier is unable to perform its obligations.

Prices
for raw materials that we or our suppliers use in manufacturing our products or components, such as steel, aluminum, petroleum-based products and various precious metals, declined
in 2008 and early 2009. Some

8

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raw
material prices began to increase during the remainder of 2009. Continued increases for these or other raw materials, including energy, may lead to higher component and production costs that could
in turn negatively impact our future profitability and cash flows because we may not be able to pass all those costs on to our customers or require our suppliers to absorb such costs.

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, including the financing of dealer inventories, involve several risks. These risks include higher refinancing
costs and the potential inability to recover our investments in leased vehicles or to collect our sales financing receivables. For instance, downgrades of our credit ratings could increase our
refinancing costs, potentially necessitating adjustments to the terms at which we provide credit to our leasing and sales financing customers. These adjustments could have the effect of reducing new
business and overall contract volume of our financial services business and in turn could adversely affect unit sales of our automotive businesses. In addition, our ability to recover our investments
in leased vehicles may deteriorate as a result of a decline in resale prices of used vehicles, and our ability to collect our sales financing receivables could be negatively affected by consumer or
dealer insolvencies or if the resale prices of the vehicles securing these receivables are insufficient. For example, we experienced a significant rise in credit defaults among our lease and finance
customers in 2009, which increased our cost of credit risk and negatively affected the operating result of our financial services business. If the default rate remains at a high level for a prolonged
period of time or rises further, our future operating results and cash flows could be adversely affected.

New
vehicle sales incentives indirectly lower the resale prices of used vehicles. A decline in resale prices of used vehicles in turn results in downward pressure on the fair values of
leased vehicles and negatively affects the carrying amount of vehicles on operating leases, as well as indirectly lowers the value of collateral in place securing our sales financing and finance lease
receivables.

As
a result of the global economic downturn, some of these risks have already materialized and may continue to materialize in the future, which could adversely affect our future
operating results, financial condition and cash flows.

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. For additional
information about credit risk inherent in our leasing and sales financing business and a description of our risk management, please refer to Note 30 to our Consolidated Financial Statements.

Our future profitability will depend on our 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, thereby negatively affecting our future sales and, as a consequence, our future operating results and cash flows.

Maintaining
the quality of our products and developing new products meeting more sophisticated customer requirements require increasingly complex technical solutions, which result in
higher research and development and other costs. Increased consumer sensitivity to pricing may limit our ability to pass higher costs on to customers and force us to continue to improve our
efficiencies and cost structures. If we are unable to improve our efficiencies and adjust our cost structures as necessary, our results of operations may be adversely affected. Our attempts to reduce
costs along the automotive value chain may also 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 provisions for

9

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new
warranties issued and expenses in excess of already established provisions for product warranties previously issued.

Our future success depends on our ability to continue to offer attractive, fuel efficient, and environmentally friendly vehicles and to adjust to consumer
demand.

Developing
attractive and fuel efficient new vehicles, including vehicles employing new propulsion technologies such as hybrid and electric vehicles, over increasingly shorter product
development cycles is critical to the success of automobile manufacturers. For example, technical solutions that reduce fuel consumption and emissions, like the diesel hybrid technology, are costly
but necessary for a sustainable mobility. Our ability to strengthen our position within our traditional product and market segments through innovations and to develop attractive and fuel efficient new
products and services while expanding into additional market segments with those new products will play an important role in determining our future success. If we are unable to timely develop these
products and meet consumer demand, a general shift in consumer preference toward smaller, more fuel efficient and environmentally friendly vehicles could have a
negative effect on our future profitability and cash flows. Such a shift could result from, among other things, increasing fuel prices, government regulations, for example regarding the level of
carbon dioxide emissions, speed limits or higher taxes on certain types of vehicles, such as sport utility vehicles or luxury automobiles, or environmental concerns. Potential delays in bringing new
vehicles to market, the inability to achieve defined fuel efficiency or emissions targets without a decline in quality, and a lack of market acceptance of new models or temporary shortages of parts
and materials required for new vehicles could 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 materially 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 governmental 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. Noncompliance with regulations applicable to the
automotive industry could also result in significant penalties or the inability to sell noncompliant vehicles in the relevant markets.

For
example, in an effort to reduce greenhouse gases, several countries and the EU have already imposed more stringent regulations on carbon dioxide emissions or are currently in the
process of adopting such regulations. For further information on government regulation and environmental matters, please refer to the discussion under the heading "Government Regulation and
Environmental Matters" in "Item 4. Information on the Company."

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 or related companies, guarantees
under buy-back commitments, and performance guarantees related to the contractual performance of joint ventures and consortia. These guarantees may expose us to financial risk. For
example, as a result of the guarantees and other obligations our subsidiary Daimler Financial Services AG undertook as one of the consortium members of Toll Collect, our future operating results and
cash flows may be adversely affected by penalties, damage claims and losses associated with an underperformance of the system. For further information concerning these contingent obligations, please
refer to the discussion under the heading "Off-Balance Sheet Arrangements  Obligations under guarantees" in "Item 5. Operating and Financial Review and
Prospects."

10

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We depend on our ability to recruit and retain highly qualified management and technical personnel.

Our
future success depends in part on our continued ability to recruit and retain highly qualified managers, engineers and other specialized personnel. Competition for employees with
requisite qualifications remains intense in our industry and the regions in which we operate. Changing demographics, primarily in Germany and other Western European countries, could exacerbate further
the competitive recruiting environment as declining birth rates and a global marketplace reduce the pool of available talent in some regions. If we are unable to hire qualified personnel in sufficient
numbers in the future, our business could be adversely affected.



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, the Chinese yuan and other world currencies against the euro. In addition, in order to manage the liquidity and cash needs of our
day-to-day operations, we hold a variety of interest rate sensitive assets and liabilities. We also hold a substantial volume of interest rate sensitive assets and liabilities
in connection with our lease and sales financing business. Changes in currency exchange rates or interest rates may have substantial adverse effects on our operating results and cash flows. 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," the discussion about market risk in "Item 11. Qualitative and Quantitative Disclosures About Market Risk" and to Note 30 to our
Consolidated Financial Statements.

Further downgrades of our debt ratings may increase our cost of capital and could negatively affect our businesses.

In
2009, several rating agencies downgraded our long-term debt rating to BBB+ and some agencies changed the outlook from stable to negative. Further 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 description of our individual 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 debt to manage liquidity. Our ability to issue debt instruments in the future may be adversely affected by declines in our operating
performance and the future condition of the credit markets.

To
manage the liquidity of the Group, we depend on the issuance of debt, principally in the European and U.S. capital markets. A decline in our operating performance or lower demand for
these types of debt instruments 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.

The
tightening of the credit markets in the latter part of 2008 and into 2009 resulted in significantly higher borrowing costs. If these difficult financing conditions were to recur, we
could be faced with higher borrowing costs and reduced funding flexibility. In particular, this could negatively affect the competitiveness and profitability of our financial services business or even
result in a limitation of the financial services we offer, thereby negatively affecting our vehicle sales.

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

11

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The carrying value of our equity investments in companies in which we hold a non-controlling equity interest depends on the ability of those companies
to operate their businesses profitably.

We
hold non-controlling equity interests in various companies. Most notably, we hold an equity interest in the European Aeronautic Defence and Space Company EADS N.V.
(EADS) and in Tognum AG (Tognum). Any factors negatively affecting the profitability of the businesses of these companies may adversely affect our ability to recover the full amount of our equity
investments, and as a result, could require us to
record impairment charges. In addition, if we account for those investments using the equity method of accounting, such factors may also affect our proportionate share in the future operating results
of our equity investees. For more information on how EADS affected the 2007 through 2009 operating results, please refer to the discussion under the heading "Operating Results" in "Item 5.
Operating and Financial Review and Prospects." Please also refer to "Critical Accounting Policies" in "Item 5. Operating and Financial Review and Prospects" for information on our accounting
policies with regard to the impairment of equity method investments. EADS is the most significant equity investment which we include in our consolidated financial statements with a three-month lag. In
connection with recent developments in the negotiations regarding EADS's A400M military transporter program, EADS announced on February 17, 2010 that it will update the A400M provision in its
2009 consolidated financial statements. This update will require certain critical assumptions and financial assessments to be made which were not finalized when our supervisory board approved
Daimler's 2009 Consolidated Financial Statements on March 1, 2010. Any future increase in that provision would negatively affect EADS's actual 2009 results and would also negatively affect
Daimler's proportionate share in EADS's results which will be reflected in Daimler's consolidated interim financial statements for the first three months of 2010. The resolution of this matter could
have a material negative effect on Daimler's earnings in the first quarter of 2010.

We may need to make cash contributions with respect to the funding of our pension benefit plans. In addition, our total pension benefit expense may
increase.

We
have pension and, to a minor degree, other post-employment benefit obligations which are underfunded. The funded status of our off-balance sheet pension and
other post-employment 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, mortality rates and other factors, may lead to increases in the size 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-employment benefit
expense in subsequent years.

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

For
additional information on employee benefits accounting, 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" and to Note 21 to our Consolidated Financial Statements.

12

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Item 4. Information on the Company.

INTRODUCTION

Organization

The legal and commercial name of our company is Daimler AG. Daimler AG is a stock corporation organized under the laws of the Federal
Republic of Germany. Its registered office is located at Mercedesstrasse 137, 70327 Stuttgart, Germany, telephone +49-711-17-0. Daimler AG's agent for service,
exclusively for actions brought by the United States Securities and Exchange Commission pursuant to the requirements of the United States federal securities laws, is Daimler North America Corporation,
located at One Mercedes Drive, Montvale, New Jersey 07645-0350.

History

Daimler AG was incorporated under the name DaimlerChrysler AG on May 6, 1998, the year in which Daimler-Benz
Aktiengesellschaft and Chrysler Corporation combined their respective businesses, stockholder groups, managements and other constituencies. On August 3, 2007, we transferred an 80.1%
controlling interest in the Chrysler automotive activities and the related Chrysler financial services business in the NAFTA region (the Chrysler activities) to a subsidiary of the private equity firm
Cerberus Capital Management L.P. (Cerberus). We initially retained a 19.9% non-controlling equity interest in Chrysler Holding LLC, a newly established holding company for
the Chrysler activities. Following a resolution adopted at an extraordinary shareholders' meeting in October 2007, we changed the name of the company from DaimlerChrysler AG to Daimler AG.

As
a result of the transfer of a majority interest in the Chrysler activities in 2007, we reported the Chrysler activities in our consolidated statements of income (loss) as discontinued
operations, with all recorded income and expense items related to the Chrysler activities included in the line item "Net profit (loss) from discontinued operations." We do not include amounts related
to discontinued operations in our segment reporting. For further information, please refer to Notes 2 and 31 to our Consolidated Financial Statements.

In
June 2009, based on a binding term sheet signed in April 2009, we entered into a redemption agreement regarding our remaining 19.9% non-controlling equity interest in
Chrysler Holding LLC. As a result of the redemption, Daimler no longer holds an equity interest in Chrysler Holding LLC or any of its subsidiaries and all Daimler designees resigned from
the board of Chrysler Holding LLC and the boards of any of its subsidiaries. Please also refer to the discussion under the heading "Material Contracts" in "Item 10. Additional
Information." For additional information on the effect of the redemption on our Consolidated Financial Statements, please refer to "Operating Results" in "Item 5. Operating and Financial Review
and Prospects" and to Note 2 to our Consolidated Financial Statements.

From
August 4, 2007 through the date of redemption on June 3, 2009, we accounted for our non-controlling equity interest in Chrysler Holding LLC with a
three-month time lag using the equity method of accounting. During that period we included our proportionate share of the consolidated results of Chrysler Holding LLC, which we previously
reported as part of Vans, Buses, Other, in the reconciliation of total segment EBIT to Group EBIT.

Business Summary and Developments

Daimler AG is the ultimate parent company of the Daimler Group. The Group develops, manufactures, distributes and sells a wide range of
automotive products, mainly passenger cars, trucks, vans and buses. It also provides financial and other services relating to its automotive businesses.

We
offer our automotive products and related financial services primarily in Western Europe and in the NAFTA region, which consists of the United States, Canada and Mexico. We derived
approximately 46% of our 2009 revenue from sales in Western Europe and 21% from sales in the United States. With respect to Western Europe, approximately 52% of the revenue achieved in that region
resulted from sales in Germany and 48% from sales in other countries. Revenue in Asia represented approximately 16% of our total revenue in 2009.

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For
information on significant acquisitions and dispositions of businesses during the last three years, please refer to Notes 2 and 12 to our Consolidated Financial Statements.
For a discussion of their effect on our revenue and operating results, please refer to "Operating Results" in "Item 5. Operating and Financial Review and Prospects."

Our
aggregate capital expenditures over the past three years for property, plant and equipment of our continuing businesses were €2.4 billion in 2009,
€3.6 billion in 2008 and €2.9 billion in 2007. In 2009, the United States and Germany accounted for 8.1% and 72.6%, respectively, of these capital
expenditures. Expenditures for equipment on operating leases related to our continuing businesses were €10.8 billion in 2009, €10.2 billion in 2008 and
€10.8 billion in 2007. For additional information on our capital expenditures, please refer to "Description of Business Segments" and "Description of Property" below.

Business Segments and Other Business Interests



At the beginning of 2009, we made some changes to our segment reporting. We now separately present the business activities of
Mercedes-Benz Vans and Daimler Buses which we previously reported as part of Vans, Buses, Other. We have adjusted 2008 and 2007 figures to reflect this change in segment presentation. For
further information regarding our segment reporting, please refer to the discussion under the heading "Operating Results" in "Item 5. Operating and Financial Review and Prospects" and
Note 31 to our Consolidated Financial Statements.

Following
the changes in our segment reporting, we report the following five segments:





Our other business interests consist primarily of our equity investments in the European Aeronautic Defence and Space Company
EADS N.V. (EADS) and in Tognum AG. We now include
these and other remaining business interests, which we previously reported as part of Vans, Buses, Other, in our reconciliation from total segment EBIT to Group EBIT, together with corporate items and
eliminations of intersegment transactions. For further information, please refer to the discussion under the heading "Operating Results" in "Item 5. Operating and Financial Review and
Prospects" and to Note 31 to our Consolidated Financial Statements.

EADS.As of December 31, 2009, one of our subsidiaries held a 22.5% equity interest in EADS. EADS is a publicly-traded company and
a global
supplier and service provider in the aerospace and defense sectors. The EADS Group includes Airbus, a manufacturer of commercial and also tanker, transport and mission aircraft, the helicopter
supplier Eurocopter, and EADS Astrium, a European space company involved in several space programs, including the Ariane program. In addition, EADS is a partner in the Eurofighter consortium and holds
an equity interest in MBDA SAS. We account for our investment in EADS with a three-month time lag using the equity method of accounting.

In
2004, 2006 and 2007, we entered into several transactions involving our EADS shares which reduced the Group's equity interest in EADS on which the Group bases its
at-equity accounting. Our share in the results of EADS in 2007 is based on an equity interest which declined from 33% at the beginning of the year to 24.9% at year-end 2007 and
our share in the results of EADS in 2008 is based on an equity interest which declined from 24.9% at the beginning of the year to 22.5% at year-end 2008. This 22.5% equity interest in EADS
is held by a

14

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subsidiary
in which we hold a 67% interest and minority investors have a 33% interest. For further information on these transactions, please refer to Note 12 to our Consolidated Financial
Statements and "Operating Results" in "Item 5. Operating and Financial Review and Prospects."

Tognum.As of December 31, 2009, we held a 28.4% equity interest in Tognum AG. Tognum is a global supplier of off-highway engines,
propulsion systems and decentralized energy systems. In 2008, we acquired shares in Tognum AG for a total amount of €702 million in cash, primarily from the Swedish investor
group EQT. We account for our investment in Tognum with a three-month time lag using the equity method of accounting.

Significant Subsidiaries

The following table shows the significant subsidiaries Daimler AG owned, directly or indirectly, as of December 31, 2009:

Name of Company

Percentage OwnedMercedes-Benz Bank AG, Stuttgart, Germany, a German stock corporation


100.0Daimler North America Corporation, Montvale, New Jersey, USA, a Delaware corporation


100.0DCFS USA, LLC, Farmington Hills, Michigan, USA, a Delaware limited liability company


100.0Daimler Trucks North America LLC, Portland, Oregon, USA, a Delaware limited liability company


100.0Mercedes-Benz do Brasil Ltda., Sao Bernardo do Campo, Sao Paulo, Brazil, a Brazilian private limited company


100.0Mitsubishi Fuso Truck and Bus Corporation, Kawasaki, Japan, a Japanese corporation


85.0


DESCRIPTION OF BUSINESS SEGMENTS

Mercedes-Benz Cars

Mercedes-Benz Cars designs, produces and sells Mercedes-Benz passenger cars, Maybach high-end
luxury sedans and smart micro compact passenger cars. In 2009, Mercedes-Benz Cars contributed approximately 51% of our revenue.



Mercedes-Benz passenger cars are world-renowned for innovative technology, highest levels of comfort, quality and safety,
and pioneering design. We offer most Mercedes-Benz passenger cars with a choice of several diesel and gasoline engines. In 2009, we began to offer the S-Class and the
ML-Class also with a gasoline hybrid engine. Under the AMG brand, we offer high performance versions of Mercedes-Benz vehicles with V8 or V12 engines in all classes, except in
the A-, B-, R-, GL- and GLK-Classes. 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, which are available in short and long wheelbase
versions. In June 2009, we introduced a new generation of the S-Class sedans, including a hybrid version, the new S 400 BlueHYBRID.

The
S-Class sedans are complemented by the CL, a top-of-the-line two-door coupe, and the SL, a luxury roadster. We plan to
introduce a new generation of the CL in September 2010. Until the end of 2009, we also produced the SLR, a high performance Mercedes-Benz sports car, in cooperation with McLaren
Cars Ltd. The production of seventy-five special edition Stirling Moss vehicles marked the end of production of the SLR model family.

At
the 2009 Frankfurt Motor Show we presented an all new sports car, the Mercedes-Benz SLS AMG. We intend to launch the SLS AMG beginning in March 2010.

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E-Class.The E-Class is a line of luxury sedans, coupes, convertibles and station wagons. We launched all new versions of the
E-Class sedan and the E-Class station wagon in March 2009 and November 2009, respectively. We also offer the CLS, a four-door coupe based on the
E-Class.

In
May 2009, we introduced an all new E-Class coupe as part of the repositioning of the successor model of the CLK coupe as an E-Class model. Similarly, in March
2010, we intend to launch an all new version of an E-Class convertible as part of the repositioning of the successor model of the CLK convertible as an E-Class model.

C-Class.The C-Class is a line of compact luxury sedans and station wagons. The CLC Sports Coupe and the SLK, a
two-seat roadster, complement the C-Class product family.

Until
the planned introduction of the E-Class convertible, the CLK convertible continues to be a part of the C-Class product family.

A-/B-Classes.The A-Class is a front wheel drive compact and the B-Class is a front wheel drive
4-door Compact Sports Tourer (CST). We do not offer the A- and B-Classes in the United States.

ML-/R-/G-/GL-/GLK-Classes.The ML-Class is a line of sport utility vehicles
with permanent all-wheel drive.

The
R-Class is a line of SUV Tourers, which is available in a short and a long wheelbase version. We plan to introduce a new generation of the R-Class in August
2010.

The
GL-Class is a line of seven seat luxury sport utility vehicles. We introduced a new generation of the GL in August 2009.

The
GLK-Class is a line of compact sport utility vehicles. In September 2009 we launched a GLK model with rear wheel drive in addition to the permanent all-wheel
drive models.

The
G-Class is a line of cross country vehicles with permanent four-wheel drive that come in a short and a long wheelbase version and as a convertible.



Under the Maybach brand, we offer a line of exclusive high-end luxury sedans with outstanding luxury, comfort, and
individuality. Maybach sedans are available in a short and a long wheelbase version, including the Maybach 57S and 62S as sportier variations.



The smart brand represents a micro compact car concept. We currently offer two models, the smart fortwo coupe and the smart fortwo
cabrio. In 2009, we introduced the smart brand in Denmark, in major metropolitan areas in China and in Sao Paulo, Brazil. We plan to introduce a new generation of the smart fortwo in the third quarter
of 2010.



Markets.In 2009, the main markets of our Mercedes-Benz Cars segment were Germany (27% of unit sales), the remainder of Western Europe
(30% of unit sales), the United States (19% of unit sales) and Asia (13% of unit sales).

Due
to the severe global economic downturn, demand for passenger cars in 2009 experienced a decline in many of our main markets. In Western Europe (excluding Germany), new registrations
of passenger cars for all manufacturers fell 7% to 9.8 million units. In contrast, in Germany new passenger car registrations for all manufacturers increased 23% to 3.8 million units.
This increase was mainly due to higher sales in the micro and subcompact car segments induced by the car scrap incentives provided by the German government. In the United States, sales of passenger
cars decreased 21% to 10.4 million units, while in Asia, sales of passenger cars increased 18% to 20.0 million units.

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Sales.The following table shows the distribution of revenue and unit sales for our Mercedes-Benz Cars segment by geographic market
since
2007:

Revenue and Unit Sales

Year Ended December 31,20091

% change

20081

% change

20071Revenue (€ in millions)Western Europe


21,613


-16


25,676


-11


28,972Germany


10,955


-11


12,277


-9


13,492Other


10,658


-20


13,399


-13


15,480NAFTA region


7,981


-18


9,721


-17


11,655United States


6,809


-21


8,620


-19


10,600Canada and Mexico


1,172


+6


1,101


+4


1,055Asia


7,777


+2


7,600


+16


6,575China


4,057


+29


3,146


+63


1,935Other


3,720


-16


4,454


-4


4,640Other markets


3,947


-17


4,775


-9


5,228World


41,318


-14


47,772


-9


52,430UnitsWestern Europe


623,489


-15


733,233


-6


779,157Germany


297,756


-10


332,472


-3


342,860Other


325,733


-19


400,761


-8


436,297NAFTA region


235,549


-17


282,161


+2


276,062United States


202,955


-19


251,160


0


251,789Canada and Mexico


32,594


+5


31,001


+28


24,273Asia


138,942


-4


144,141


+17


123,356China


67,451


+39


48,620


+59


30,615Other


71,491


-25


95,521


+3


92,741Other markets


95,925


-15


113,478


-1


114,609World


1,093,905


-14


1,273,013


-2


1,293,184


1Revenue
and unit sales for 2009, 2008 and 2007 include sales of Mitsubishi pickup trucks (L200) assembled and sold by one of our subsidiaries in South Africa
and Mitsubishi Pajero vehicles sold by that subsidiary (5,274, 8,190 and 10,066 units, respectively).




In 2009, worldwide unit sales of our Mercedes-Benz Cars segment went down 14% to 1,093,905 compared to 1,273,013 in the prior year.
Primarily due to the global economic downturn, unit sales declined in almost all of our classes. Sales of the S-Class (including Maybach) were 39% lower at 57,109 units compared to 92,869
units in 2008. Due to the availability of the new models of the E-Class sedan, coupe and station wagon (since March, May and November 2009, respectively) unit sales of the
E-Class increased 23% to 212,142 units in 2009 compared to 172,912 units in 2008. Unit sales of the C-Class family decreased 28% to 322,815 units, partially as a result of
strong price competition in that vehicle segment, but also due to the repositioning of the CLK coupe as an E-Class coupe in May 2009. Sales of the
ML-/R-/G-/GL-/GLK-Classes at 167,153 units were slightly above the prior year's level of 161,337 units. A decline in unit sales of the
ML-/R-/G-/GL-Classes was more than offset by the first time full availability of the GLK-Class. Sales of the
A-/B-Classes dropped to 215,475 units compared to 250,304 units in 2008. Overall, sales of smart vehicles reached 113,937 units, 18% below last year's sales of 138,957 units.

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In
Germany, Mercedes-Benz Cars sold 297,756 units, a decline of 10% compared to 2008. Unit sales in Western Europe (excluding Germany) decreased 19% to 325,733 units. In the
United States, we sold 202,952 units in 2009 compared to 251,160 units in 2008. Unit sales in China went up 39% to 67,451 units, while in the rest of Asia (excluding China) sales decreased 25% to
71,491 units. The decrease outside of China was primarily due to lower unit sales in Japan (26,669 units in 2009 compared to 36,969 units in 2008). For a discussion of changes in revenue, please refer
to "Operating Results" in "Item 5. Operating and Financial Review and Prospects."

The
following table shows, by vehicle line, the number of units sold since 2007:

Year Ended December 31,2009

2008

2007UnitsS-Class (including CL, SL and SLR) and Maybach


57,109


92,869


107,021E-Class (including CLS and, since May 2009, the E-Class coupe)


212,142


172,912


230,878C-Class (including CLC, CLK and SLK)


322,815


448,444


386,521A-/B-Classes


215,475


250,304


275,413ML-/R-/G-/GL-/GLK-Classes


167,153


161,337


180,217Smart


113,937


138,957


103,068Other1


5,274


8,190


10,066Total


1,093,905


1,273,013


1,293,184


1This
category represents Mitsubishi pickup trucks (L200) assembled and sold by one of our subsidiaries in South Africa and Mitsubishi Pajero vehicles sold by
that subsidiary.


Competition.In Western Europe, our Mercedes-Benz passenger cars compete primarily with products of BMW (BMW, Rolls-Royce), Volkswagen
(Audi, Porsche, Bentley, VW) and, depending on the market segment, Fiat (Lancia, Alfa Romeo, Ferrari, Maserati), Ford (Volvo), General Motors (Opel, Vauxhall), PSA (Peugeot/Citroen), Renault, Tata
Motors (Jaguar, Land Rover) and Toyota (Toyota, Lexus).

In
the United States, our principal competitors of our Mercedes-Benz passenger cars include BMW (BMW, Rolls-Royce), Ford (Lincoln, Volvo), Honda (Acura), Nissan (Infiniti),
Tata Motors (Jaguar, Land Rover), Toyota (Lexus), Volkswagen (Audi, Porsche, Bentley, VW) and, depending on the market segment, Nissan, other Toyota brands and certain models produced by General
Motors (Cadillac) and Fiat (Jeep).

In
Asia, our main competitors are BMW (BMW, Rolls-Royce), Volkswagen (Audi, Porsche, Bentley, VW) and, depending on the market segment, Fiat (Lancia, Alfa Romeo, Ferrari, Maserati), Ford
(Volvo), General Motors (Opel, Vauxhall), PSA (Peugeot/Citroen), Renault, Tata Motors (Jaguar, Land Rover) and Toyota (Toyota, Lexus).

Competitors
of the Maybach are Rolls-Royce and Bentley sedans.

Principal
competitors of smart vehicles are certain models of Fiat, Ford, PSA (Peugeot/Citroen), Renault, Suzuki, Toyota (Toyota, Daihatsu), BMW (Mini) and Volkswagen (Seat, Skoda, VW).



We distribute Mercedes-Benz passenger cars through a worldwide distribution system. 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 major markets worldwide, including the United States, Canada, Japan and most European markets, we operate our own wholesale subsidiaries which we call market
performance centers. In Canada, South Africa, Australia, Germany and select European metropolitan areas, we also operate our own retail outlets.

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In
Europe and Asia we sell our Maybach sedans through Maybach centers, which are dealerships exclusively dedicated to the Maybach brand, and through select Mercedes-Benz
dealers. In the United States we distribute our Maybach line through select Mercedes-Benz dealers.

A
wide network of smart dealerships in forty-two countries provides sales and repair services for our smart vehicles. We sell the smart fortwo coupe and the smart fortwo
cabrio in the United States through Penske Automotive Group (PAG) as the official distributor.



The following table shows capital expenditures for property, plant and equipment and intangible assets and research and development
expenditures of the Mercedes-Benz Cars segment in the last three years:

Year Ended December 31,2009

2008

2007(€ in millions)Capital expenditures for property, plant and equipment and intangible assets (excluding finance leases)


2,585


3,379


2,680Research and development expenditures


2,696


2,994


2,733thereof: Capitalized development costs


913


1,060


705




The
significant decrease in capital expenditures in 2009 resulted primarily from cost reduction initiatives in response to the global economic downturn. Despite that decrease, capital
expenditures for new products remained at a high level. The main drivers of our investment activities in 2009 were the successor models of the E-Class sedan and station wagon, the
E-Class coupe as a repositioned successor model to the CLK coupe, and new engines with higher fuel efficiency and lower carbon dioxide emissions.

Research
and development activities of Mercedes-Benz Cars in 2009 related primarily to the development of new and successor models of the
A-/B-Classes, the ML-/GL-Classes and the S-Class (sedan, SL). Another focus was the
further reduction of fuel consumption and carbon dioxide emissions through, for example, hybrid-, Bluetec-, electro- and fuel cell technologies.

Daimler Trucks

Daimler Trucks manufactures and sells trucks and specialty vehicles under the brand names Mercedes-Benz, Freightliner,
Western Star, Thomas Built Buses and Fuso. Our worldwide facilities provide us with a strong production and assembly network for commercial vehicles and core components. Daimler Trucks contributed
approximately 21% of our 2009 revenue. In 2009, we ceased production of trucks under the Sterling brand name, although our 2009 sales included 2,725 Sterling units from existing stock.

In
the fourth quarter of 2008, as part of a strategic partnership, we acquired a 10% equity interest in the Russian commercial vehicle manufacturer Kamaz OAO for US$250 million in
cash. The purchase agreement requires us to make an additional one-time payment in 2012. The amount of the payment will depend on Kamaz's interim business performance, but in any event
will not exceed US$50 million. We account for our equity interest in Kamaz with a three months time lag using the equity method of accounting. We also plan to work with Kamaz on joint projects
in several areas, including product distribution, component sharing and technology transfers. In that regard, at the end of 2009, we entered into agreements with Kamaz to establish two joint ventures
regarding the distribution and, with respect to some truck lines, the potential assembly of Mercedes-Benz and Fuso trucks and the sale of Mercedes-Benz and Setra buses in
Russia.

19

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Mercedes-Benz Trucks.Our 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 vehicles Econic and Zetros. The Unimog, a four-wheel drive vehicle for special purpose applications,
complements the line-up. In Turkey and Brazil, we manufacture heavy-duty and medium-duty trucks for the respective local and certain export markets. Overall, our
Mercedes-Benz trucks range from 6 metric tons gross vehicle weight (GVW) to 41 metric tons GVW. In 2008, we started to introduce trucks with alternative drive systems, the Axor BlueTec
Hybrid, the Econic BlueTec Hybrid and the Econic CNG Hybrid. At the end of 2010, we plan to expand our hybrid truck line with the launch of the Atego BlueTec Hybrid in the medium-duty
category.

Freightliner Trucks, Western Star Trucks, and Thomas Built Buses.Our U.S. subsidiary Daimler Trucks North America LLC
manufactures trucks and
buses (based on truck chassis) in Classes 3 through 8 (from 9,000 lbs. GVW to 160,000 lbs. GVW) and sells them under the Freightliner, Western Star, and Thomas Built Buses brand names,
primarily in the NAFTA region. It also manufactures chassis for trucks, buses, walk-in vans and motor homes in Classes 3 through 7 (from 10,000 lbs. GVW to 33,000 lbs.
GVW). In 2009, Freightliner introduced a new version of the Coronado, a premium on-highway truck. Production of the new Coronado commenced in January 2010.

In
order to comply with the new U.S. emission regulation EPA 10 which became effective in January 2010, we began to offer truck engines based on our Heavy Duty Engine Platform featuring
our BlueTec emission reduction technology.

In
the fourth quarter of 2008, we adopted a wide-ranging plan to optimize and reposition the business operations of our subsidiary Daimler Trucks North America. Measures
provided for in the plan included the discontinuation of the Sterling Trucks brand in 2009, a further consolidation of our production network in the NAFTA region, capacity adjustments, including
closing two truck manufacturing plants in 2009 and 2010, respectively, and headcount reductions of up to 3,500 (of a total headcount of 20,205 at the end of October 2008) to be accomplished primarily
in 2009 and 2010. We achieved most of the originally targeted headcount reductions in 2009. In October 2009, management decided not to proceed with the closing of the truck manufacturing plant in
Portland, Oregon, which was originally scheduled for June 2010. In order to compensate for the discontinuation of the Sterling brand and in an effort to serve market segments that were previously
covered exclusively by Sterling vehicle offerings, Daimler Trucks North America expects to supplement the Freightliner and Western Star product lines where appropriate. For information on how the
optimization plan of Daimler Trucks North America affected EBIT of our Daimler Trucks Segment in 2008 and 2009, please refer to the discussion under the heading "Operating Results" in "Item 5.
Operating and Financial Review and Prospects" and to Note 4 to our Consolidated Financial Statements.

Mitsubishi Fuso Trucks and Buses.Our Japanese subsidiary Mitsubishi Fuso Truck and Bus Corporation (MFTBC) offers a comprehensive
truck portfolio
and several bus lines, primarily for the Japanese and other Asian markets. The line-up includes the Canter trucks (light-duty), the Fighter trucks (medium-duty) and
the Super Great trucks (heavy-duty) and also certain bus models (Rosa and Aero). MFTBC also sells trucks in Africa, Australia, Europe, Latin America and the United States. In 2009, MFTBC
introduced a new version of the Mitsubishi Fuso Super Great truck in Japan, and in 2010 it plans to introduce a new light duty truck.

In
May 2009, we announced a plan for a realignment of MFTBC's global operations to optimize its business and address changes in the markets in which it operates. The plan calls for the
streamlining of the product portfolio, reorganizing the plant network, consolidating and strengthening the Japanese retail network, and other efficiency improvements. In that regard, we expect to
relocate and idle select production sites, reduce headcount by up to 2,300 employees by the end of 2010, and reduce the total number of dealers in MFTBC's Japanese dealer network. For information on
how this program affected EBIT of our Daimler Trucks Segment in 2009, please refer to the discussion under the heading "Operating Results" in "Item 5. Operating and Financial Review and
Prospects" and to Note 4 to our Consolidated Financial Statements.

20

---





Markets.Demand for trucks in most geographic areas depends to a large degree on prevailing general economic conditions, which directly
influence
transportation needs and the availability of funds for capital investment. Our most important truck markets are Western Europe (17% of unit sales), the NAFTA region (24% of unit sales), Latin America
(14% of unit sales) and Asia (excluding Australia) (33% of unit sales).

As
a result of the global economic downturn, demand for transportation services generally decreased, leading to significantly lower truck sales in almost all of our main markets.

In
Western Europe, combined registrations for medium- and heavy-duty trucks decreased significantly from 333,232 units in 2008 to 192,280 units in 2009. In the
heavy-duty truck segment, registrations were down 45% from 268,362 units in 2008 to 148,914 units in 2009 and registrations in the medium-duty segment fell from 64,870 units in
2008 to 43,366 units in 2009.

In
Germany, combined registrations for medium- and heavy-duty trucks declined 39% from 92,903 units in 2008 to 56,987 units in 2009.

In
the NAFTA region, retail sales of all manufacturers of trucks in the medium- and heavy-duty categories (Classes 5 through 8) reached 215,899 units, 35% less
than in 2008 (332,727 units). This decrease primarily reflects the continuing decline in demand for heavy- and medium-duty trucks in the United States, where retail sales of all
manufacturers in the medium- and heavy-duty categories (Classes 5 through 8) decreased 31% from 262,050 units in 2008 to 179,828 units in 2009. Retail sales in the
medium-duty segment (Class 5 through 7) fell from 128,577 units in 2008 to 85,030 units in 2009, and retail sales for all manufacturers in the Class 8
heavy-duty truck category were down 29% from 133,473 units in 2008 to 94,798 units in 2009.

In
Latin America, sales of heavy- and medium-duty trucks reached 161,124 units, 19% less than in 2008.

In
Japan, sales of trucks and buses by all manufacturers decreased 40% to 107,662 units. This decrease was mainly the result of the continued weak economy in Japan.

Sales.The following table shows the distribution of revenue and unit sales of our Daimler Trucks segment by geographic market since
2007:

Revenue and Unit Sales

Year Ended December 31,2009

% change

2008

% change

2007Revenue (€ in millions)Western Europe


5,835


-40


9,671


-1


9,761Germany


3,669


-35


5,665


+1


5,634Other


2,166


-46


4,007


-3


4,127NAFTA region


4,791


-28


6,656


-12


7,599United States


3,894


-28


5,372


-14


6,241Canada


501


-36


785


-5


823Mexico


395


-21


500


-7


535Latin America


2,080


-32


3,046


+25


2,442Brazil


1,728


-21


2,174


+32


1,654Other


352


-60


871


+11


788Asia (including Australia)


4,224


-31


6,090


+14


5,358Japan


2,434


-22


3,124


-3


3,215Other


1,789


-40


2,966


+38


2,144Other markets


1,431


-54


3,109


-6


3,306World


18,360


-36


28,572


0


28,466


21

---





Year Ended December 31,2009

% change

2008

% change

2007UnitsWestern Europe


44,286


-49


86,742


-1


87,665Germany


24,951


-40


41,597


+1


41,006Other


19,335


-57


45,145


-3


46,659NAFTA region


61,700


-37


97,313


-15


114,049United States


52,361


-33


77,978


-18


94,649Canada


5,806


-41


9,907


-8


10,790Mexico


3,533


-63


9,428


+10


8,610Latin America


37,069


-37


58,951


+11


53,017Brazil


30,492


-12


34,463


+23


27,943Other


6,577


-73


24,488


-2


25,074Asia (including Australia)


92,998


-44


164,765


+8


153,162Japan


23,102


-45


42,035


-22


53,992Other


69,896


-43


122,730


+24


99,170Other markets


23,275


-64


64,303


+8


59,774World


259,328


-45


472,074


+1


467,667




Worldwide unit sales of our Daimler Trucks segment decreased 45% from 472,074 vehicles in 2008 to 259,328 vehicles in 2009, primarily as a result
of the global economic downturn.

Unit
sales in Western Europe declined 49% due to lower unit sales in all markets in that region, but mainly in Germany, France, the United Kingdom and Spain. In Germany, the most
important market for our Mercedes-Benz trucks, unit sales declined 40% to 24,951 units. Unit sales in Germany represented 10% and the remaining Western European market represented 7% of
our total 2009 truck sales.

In
the NAFTA region, unit sales were 37% lower at 61,700 units. This decrease mainly reflects a further decline in demand in the U.S. commercial vehicle markets due to weak economic
conditions. Unit sales in the United States were down 33% at 52,361 units, representing 20% of our total 2009 truck sales.

Unit
sales in Asia (including Australia) fell 44% from 164,765 units in 2008 to 92,998 units in 2009. Unit sales in Japan, which in 2009 consisted primarily of sales of our subsidiary
MFTBC, declined 45% to 23,102 units. This decline mainly reflects the continuing weakness of the Japanese economy and a recognizable trend of persistently lower truck demand in Japan. With 33% of our
total worldwide truck sales, Asia (excluding Australia) has become an important market for our truck business.

In
Latin America, sales decreased 37% from 58,951 units in 2008 to 37,069 units in 2009.

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

Competition.Competitors of our Daimler Trucks segment vary in each geographic region. In Western Europe, our main competitors are
Scania, MAN,
Iveco, Volvo, DAF and Renault. In the NAFTA markets, our main competitors in the Class 5 through 8 truck categories are Navistar International, Paccar (Kenworth, Peterbilt), Volvo/Mack, General
Motors and Ford. In Latin America, our main competitor is Volkswagen, and in Japan and the South East Asian markets, our main competitors (including buses) are Hino, Isuzu and Nissan Diesel.



We distribute our Daimler Trucks products through a worldwide distribution and service network.

22

---



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

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

In
the NAFTA region, we primarily sell our products through a network of independent dealers. In Japan, MFTBC sells its vehicles mainly through its own wholesale network and its own
retail organization. In Latin America and other international markets, we sell our Daimler Trucks vehicles through independent distributors or, if we have a local production company, through the sales
organization of that company.



The table below shows capital expenditures for property, plant and equipment and intangible assets and research and development
expenditures of our Daimler Trucks segment during each of the last three years:

Year Ended December 31,2009

2008

2007(€ in millions)Capital expenditures for property, plant and equipment and intangible assets (excluding finance leases)


1,024


1,442


1,110Research and development expenditures


1,116


1,056


1,047thereof: Capitalized development costs


368


326


283




Capital
expenditures in 2009 related primarily to new generations of our truck lines and new engines for our heavy-duty and medium-duty trucks.

Research
and development expenditures in 2009 focused on new truck generations. New low emission technologies, including BlueTec for medium- and heavy-duty applications,
complemented the 2009 research and development activities.

Mercedes-Benz Vans

Mercedes-Benz Vans designs, manufactures and sells vans under the brand names Mercedes-Benz and Freightliner.
In 2009, Mercedes-Benz Vans contributed approximately 8% of our revenue.



Worldwide, we currently offer three lines of Mercedes-Benz vans between 1.9 metric tons (t) and 7.5t gross vehicle
weight (GVW): the Vario, the Vito/Viano and the Sprinter.

In
the NAFTA region we sell the Sprinter under the Freightliner brand name and, since January 1, 2010, also under the Mercedes-Benz brand name. Until
December 31, 2009, subsidiaries of Chrysler Holding LLC sold the Sprinter in the U.S. under the Dodge and Freightliner brand names and in Canada under the Dodge brand name pursuant to a
general distributor arrangement.



Markets.In most geographic areas, demand for vans depends to a large degree on prevailing general economic conditions, which directly
influence
transportation needs and the availability of funds for capital investment.

In
2009, our most important van markets were Germany (35% of unit sales), the remainder of Western Europe (42% of unit sales), Eastern Europe (7% of unit sales), Latin America (6% of
unit sales) and Asia (3% of unit sales).

23

---



In
all our main markets, demand for vans went down, primarily as a result of the global economic downturn. In Germany, new registrations of vans (mid-size and large vans) for
all manufacturers decreased 25% to 206,000 units. In Western Europe (excluding Germany), registrations in the combined mid-size and large van market segment declined 33% to 579,600 units.

In
the U.S., sales in the large van segment in which we operate decreased 36% to 160,600 units.

Sales.The following table shows the distribution of revenue and unit sales of our Mercedes-Benz Vans segment by geographic market
since
2007:

Revenue and Unit Sales

Year Ended December 31,2009

% change

2008

% change

2007Revenue (€ in millions)1, 2Western Europe


5,063


-31


7,341


+1


7,244Germany


2,821


-22


3,622


+5


3,453Other


2,242


-40


3,719


-2


3,791Eastern Europe


340


-57


792


+17


674NAFTA region


106


-79


510


-17


611Latin America (excluding Mexico)


236


-26


320


+15


278Asia


214


-9


235


+14


207Other markets


256


-9


281


-14


327World


6,215


-34


9,479


+2


9,341




Year Ended December 31,2009

% change

2008

% change

2007Units1Western Europe


128,134


-38


207,137


+1


205,812Germany


58,185


-21


74,036


+1


73,262Other


69,949


-47


133,101


+1


132,550Eastern Europe


10,980


-61


27,929


+17


23963NAFTA region


2,591


-88


21,487


-25


28,476Latin America (excluding Mexico)


9,453


-26


12,857


+13


11,409Asia


5,260


-34


7,999


-4


8,344Other markets


9,158


-6


9,789


-12


11,069World


165,576


-42


287,198


-1


289,073
  1Revenue
and unit sales include sales of Sprinter vans to a subsidiary of Chrysler Holding LLC for subsequent resale to dealers under the Freightliner
and Dodge brand names.2Revenue
in 2009, 2008 and 2007 includes €0.6 billion, €0.9 billion and €0.9 billion,
respectively, from the production of a van for Volkswagen. These vans are not included in our unit sales figures.




Mainly as a result of the global economic downturn, our 2009 van sales in the major geographic markets in which we operate were down significantly
compared to the prior year. These include Western Europe (-38%), Eastern Europe (-61%), Asia (-34%), the NAFTA region (-88%), and Latin America
(excluding Mexico) (-26%). The discontinuation of a general distributor arrangement with Chrysler regarding the distribution of our vans also contributed to the decline in the NAFTA
region.

24

---



Competition.In Western Europe and Eastern Europe, our principal competitors are Fiat (Fiat, Iveco), Ford, Volkswagen, Renault and PSA
(Peugeot,
Citroen). In Latin America, competitors include Fiat (Fiat, Iveco) and Renault. In the United States, competitors include Ford and General Motors (Chevrolet, GMC).



In Germany, we sell our vans through our own wholesale and retail network as well as through independent dealers.

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

In
the United States and Canada, we previously sold vans to subsidiaries of Chrysler Holding LLC, which acted as general distributors and resold them in the U.S. under the
Freightliner and Dodge brand names and in Canada under the Dodge brand name through a network of independent Freightliner and Dodge dealers. Since January 2010, we sell vans under the Freightliner
brand through a network of independent Freightliner dealers and, in addition, Mercedes-Benz vans through our own wholesale network.

In
other international markets, including Latin America, we sell our vans through independent distributors or, if we have a local production company, through the sales organization of
that company.



The table below shows capital expenditures for property, plant and equipment and intangible assets and research and development
expenditures of our Mercedes-Benz Vans segment during each of the last three years:

Year Ended December 31,2009

2008

2007(€ in millions)Capital expenditures for property, plant and equipment and intangible assets (excluding finance leases)


122


160


148Research and development expenditures


193


228


220thereof: Capitalized development costs


0


0


0




In
2009, capital expenditures of our Mercedes-Benz Vans segment primarily related to production capacity increases for our Sprinter vans and to the upcoming facelift of the
Vito/Viano series.

Research
and development activities focused primarily on enhancements of engines to meet future emission regulations.

Daimler Buses

Daimler Buses is a global full-line supplier in the worldwide bus market. In 2009, Daimler Buses contributed approximately
5% of our revenue.



Our product portfolio includes city buses, coaches, intercity buses, midi buses and bus chassis. We sell complete buses under the
Mercedes-Benz and Setra brands in Europe, under the Mercedes-Benz brand name in Mexico and under the Setra and Orion brand names in the United States and Canada. In addition,
Daimler Buses produces and sells worldwide a wide range of bus chassis under the brand name Mercedes-Benz.

25

---





Markets.Based on units sales, our main markets for buses and bus chassis are Latin America (50% of unit sales), Western Europe (22% of
unit sales),
and the NAFTA region (12% of unit sales).

In
2009, registrations of coaches and city and intercity buses declined in all our major geographic markets. In Western Europe and Latin America, demand for coaches and city and
intercity buses fell by 7% and 16%, respectively, to 7,219 and 16,286 units, respectively.

In
the NAFTA region, retail sales for all manufacturers of coaches and city and intercity buses (excluding school buses) fell 44% from 6,997 units in 2008 to 3,899 units in 2009.

Sales.The following table shows the distribution of revenue and unit sales of our Daimler Buses segment by geographic market since
2007:

Revenue and Unit Sales

Year Ended December 31,2009

% change

2008

% change

2007Revenue (€ in millions)Western Europe


2,110


-8


2,305


+7


2,147Germany


958


-4


994


+12


886Other


1,152


-12


1,311


+4


1,261NAFTA region


684


-3


702


+17


602Latin America (excluding Mexico)


692


-24


906


+5


862Other markets


752


-16


895


+21


739World


4,238


-12


4,808


+11


4,350




Year Ended December 31,2009

% change

2008

% change

2007UnitsWestern Europe


7,219


-7


7,766


+12


6,953Germany


2,831


-9


3.099


+11


2,793Other


4,388


-6


4,667


+12


4,160NAFTA region


3,899


-44


6,997


+15


6,104Latin America (excluding Mexico)


16,286


-16


19,467


-3


20,072Other markets


5,078


-20


6,361


+7


5,920World


32,482


-20


40,591


+4


39,049




In 2009, sales of Mercedes-Benz and Setra buses and bus chassis in Western Europe declined 7% as a result of a weakening bus market.
The coach and intercity market segments in particular experienced a significant decline in demand as a result of the global economic downturn, while sales of city buses increased 7%.

In
Latin America demand for bus chassis decreased 16% to 16,286 units compared to the high sales volume in 2008.

Unit
sales in the U.S. and Canada increased from 940 units in 2008 to 1,163 units in 2009, primarily as a result of higher unit sales of Orion buses. In Mexico, bus unit sales decreased
55% due to a drop in demand.

Competition.Our main competitor in the worldwide bus sector (over 8t GVW) is Volvo. In Western Europe,
other major competitors are MAN Commercial Vehicles (MAN, Neoplan), Scania and Irisbus. In South America, our major competitors are Volkswagen and Agrale, although, in addition to Volvo, Scania also
competes in that region.

26

---







We distribute our buses through a worldwide distribution and service network.

In
our major Western European markets (excluding Germany), we sell our buses through our own retail network and independent dealers.

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

In
the United States and Canada, we sell Orion and Setra buses directly to customers. In Mexico we sell buses through independent Mercedes-Benz dealers.

In
other international markets, we sell our buses through independent distributors. If we have a local production company, we sell buses through the sales organization of that company.



The table below shows capital expenditures for property, plant and equipment and intangible assets and research and development
expenditures of Daimler Buses during each of the last three years:

Year Ended December 31,2009

2008

2007(€ in millions)Capital expenditures for property, plant and equipment and intangible assets (excluding finance leases)


88


121


100Research and development expenditures


212


178


143thereof: Capitalized development costs


5


1


2




In
2009, we reduced capital expenditures compared to the prior year, mainly in order to adjust our spending to the overall decline in demand.

In
2009, research and development expenditures for Daimler Buses went up, primarily due to higher expenditures for successor products for the European markets, activities to meet new
emission regulations (Euro VI, EPA 10) and measures to reduce fuel consumption and carbon dioxide emissions (such as hybrid, fuel cell and diesel technology).

Daimler Financial Services

Our financial services activities, which contributed approximately 15% of our revenue in 2009, consist principally of financing and
leasing services supporting our Mercedes-Benz and other vehicle businesses.

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 vehicle inventory and property, plant and equipment purchases, and we offer insurance brokerage and fleet management services, including dealer property and casualty insurance. In
Germany, we operate a fully licensed bank, the Mercedes-Benz Bank. The Mercedes-Benz Bank offers financial services to our customers and employees in Germany. These services
include leasing and sales financing services, car savings plans, credit cards and demand deposit accounts. In addition, the Mercedes-Benz Bank operates branches in Great Britain and Spain
to refinance the local dealer portfolios. At December 31, 2009, the Mercedes-Benz Bank held deposits of €12.6 billion.

We
also hold an ownership interest in Toll Collect. In September 2002, our subsidiary Daimler Financial 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

27

---



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. We account for our equity
interest in Toll Collect using the equity method of accounting. 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 27 and 28 to our Consolidated Financial Statements.



Revenue of our Daimler Financial Services segment amounted to €12.0 billion in 2009,
€12.0 billion in 2008 and €11.0 billion in 2007.

The
following table shows the distribution of revenue derived from our financial services activities by geographic market since 2007:

Year Ended December 31,2009

2008

2007(€ in millions)Western Europe


4,648


4,971


4,773Germany


2,829


2,659


2,508Other


1,819


2,312


2,265NAFTA region


5,954


5,688


5,269United States


5,394


5,197


4,816Canada and Mexico


560


491


453Other markets


1,394


1,305


925World


11,996


11,964


10,967




In
2009, we generated approximately 24% of our total financial services business in Germany, 15% in other Western European countries and 50% in the NAFTA region. We discuss
period-to-period changes in revenue under the heading "Operating Results" in "Item 5. Operating and Financial Review and Prospects."

In
2009, new leasing and finance contracts processed by our Daimler Financial Services segment covered 848,142 units with a total value of €25.1 billion. In the
prior year, we processed new leasing and finance contracts covering 955,598 units with a total value of €29.5 billion. The total value of leasing and finance contracts at
December 31, 2009 was €58.3 billion compared to €63.4 billion at December 31, 2008, an 8% decrease in total contract value. Excluding
currency translation effects, our total contract value decreased 9% compared to 2008.

The
average contract balance of contracts entered into during 2009 was €29,554. The average original term of our total portfolio of leasing and finance contracts as of
December 31, 2009 was 42 months.

The
following table shows, for our financial services business at December 31, 2009, the number of units covered and the value represented by new leasing and finance contracts as
well as the number of units covered

28

---



and
the value represented by all our outstanding leasing and finance contracts, 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 States


196,181


6,607


603,287


17,708Germany


316,491


8,126


748,583


16,137Canada


24,076


811


69,945


2,002Mexico


10,462


306


40,065


805United Kingdom


67,304


1,579


152,057


2,826France


31,108


814


92,548


1,812Italy


19,478


450


75,923


1,517Japan


17,161


715


87,759


2,171Australia


15,357


506


54,687


1,624Netherlands


11,193


442


42,357


1,053Other Countries


139,331


4,710


449,637


10,695Total


848,142


25,066


2,416,848


58,350




In
the financial services area, our main competitors are leasing and finance subsidiaries of banks and financial institutions and 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 property, plant and equipment and intangible assets, which related largely to the
acquisition of data processing equipment, and additions to equipment under operating leases of our financial services business during each of the last three years:

Year Ended December 31,2009

2008

2007(€ in millions)Capital expenditures for property, plant and equipment and intangible assets (excluding finance leases)


21


61


53Equipment on operating leases


4,506


5,390


6,093


SUPPLIES AND RAW MATERIALS

We conduct our worldwide procurement activities through a global procurement function. We aim to maximize the efficiency of our supply
chain by working with first tier suppliers, select sub-suppliers, raw material suppliers, and transportation carriers.

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 in
order to ensure an adequate supply of parts and components at a competitive price level. For example, in an effort to avoid possible future shortages and further limit price increases, we enter into,
or renegotiate as necessary, annual or long-term supply agreements with suppliers. We also purchase certain raw materials or commodities on the spot market and use derivative commodity
instruments, to the extent we deem appropriate, to hedge against the price volatility of some precious metals that we use in catalytic converters. We also research the possible use of alternative
materials and processes for use in catalytic converters and other components. We have established a corporate commodity risk management committee to provide enhanced control and oversight over our
commodity price exposure.

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Prices
for most raw materials that we use in manufacturing our products, including steel, aluminum, petroleum-based products and various precious metals, declined in 2008 and in early
2009. Even though some raw material prices increased during the remainder of 2009, prices overall were lower on average compared to 2008, which reduced our material costs in 2009. If the global
economy continues to recover in 2010, we expect raw material prices to increase from their current levels.

In
2009, the intense competition in the automotive industry and significant declines in vehicle sales as a result of the global economic downturn that began in the second half of 2008
and continued widely into 2009 had a significant adverse effect on the financial position of some of our suppliers. As a result, some of our suppliers are in financial distress or are the subject of
bankruptcy proceedings. Consistent with general industry practice, we source select parts or components from a single supplier after a technical and commercial verification of the supplier's
capability to meet the projected demand. This practice carries the risk of potential production disruption if the supplier is unable to perform its obligations. In order to ensure a reliable supply
chain for parts, sub-assemblies and other materials, we provide assistance, including financial assistance, to some of our suppliers. The need for such assistance will likely continue in
2010 and may increase significantly if global economic conditions do not continue to improve. In order to manage supply risks effectively, we have implemented a comprehensive risk management system to
identify and mitigate supply risk at an early stage.

Our
financial performance also depends in part on obtaining competitive prices from suppliers. Our ability to achieve further price reductions from suppliers, however, has been limited
by a combination of factors, including consolidation among automotive suppliers, the use of a single supplier for certain components, supplier financial difficulties due to the global economic
downturn and increasing supplier insolvencies.

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. As a result of increased environmental concerns regarding, for example, carbon dioxide emissions,
and related government regulation, we have already incurred considerable compliance costs and expect to incur significant additional 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 and state regulations restrict vehicle exhaust levels by imposing stringent tailpipe emission control
standards. They also
impose standards for onboard diagnostic systems to monitor the emission control system, including the onboard refueling vapor recovery systems that control refueling and evaporative emissions.
Manufacturers are responsible under these regulations for the performance of vehicle emission control systems over certain time and mileage periods. Developing compliant emission control systems and
repairing or replacing them should they fail to perform in accordance with applicable standards is costly.

Federal.Regulations issued by the United States Environmental Protection Agency, or EPA, under the Clean Air Act apply to passenger
cars (including
sport utility vehicles) and heavy-duty vehicles we sell in the U.S. We are responsible for the emission performance of these vehicles for their full useful lives.



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California Standards.The State of California sets its own stringent emission control standards for passenger cars and light-duty
trucks.

The
California Air Resources Board (CARB) plans to impose more stringent emission control standards, the "Low Emission Vehicle III" (LEV III) standards. The final standards for
passenger cars and light-duty trucks are expected to be completed in 2010, with the phase-in period beginning in 2014. It is anticipated that the new standards will include requirements
for an extended warranty on emission control systems, new stringent vehicle testing procedures and extremely low emission targets. If some or all of our Mercedes-Benz passenger cars or
light-duty trucks do not meet the new standards at the time of the phase-in, we may be subject to significant penalties or may be unable to sell vehicles that do not comply with the
standards. In any event, the costs of complying with the new standards will increase our vehicle costs and the extended warranty will increase our financial exposure.

California's
current LEV II program includes regulations issued by the CARB that require large volume manufacturers to earn an increasing number of zero-emission vehicle
(ZEV) credits. There is also an ongoing discussion about future requirements for zero-emission buses (ZEB). We do not expect to become a large volume manufacturer, as defined by the ZEV
mandate, before the 2016 model year. In the interim, under the ZEV mandate, we will be treated as an intermediate volume manufacturer which allows us to meet the ZEV requirement with partial zero
emission vehicles (PZEVs). Manufacturers may earn ZEV credits by selling vehicles that use various technologies (e.g. electric batteries, hydrogen fuel cells, compressed natural gas, and
gasoline/electric hybrids) to limit or eliminate emissions. By 2018, up to 50% of the vehicles we sell in California will require some level of these technologies to meet the ZEV mandate.

We
expect revisions to the ZEV program planned for 2010 to result in a more demanding program requiring passenger vehicle manufacturers to sell in the future fuel cell vehicles, battery
electric vehicles and plug-in vehicles in California. The revisions are expected to become effective with the 2015 model year.

Meeting
the California LEV standards and ZEV regulations in future years will require significant progress in the development of engine, exhaust after-treatment, and fuel control
technologies. We also expect to continue to incur significant costs in developing low or zero-emission technologies. Compliance with the ZEV regulations could force us to suspend the sale
of non-zero-emission vehicles in California or to sell zero-emission vehicles there significantly below cost. Either alternative would have a substantial adverse
effect on our profitability and cash flows.

The
federal Clean Air Act permits other states to adopt California standards as an alternative to the EPA's Tier 2 program. To date, fourteen states have adopted the California
LEV II standard including Arizona, Connecticut, Florida, Massachusetts, Maine, Maryland, New Jersey, New York, New Mexico, Oregon, Pennsylvania, Rhode Island, Vermont and Washington. All of these
states, except Washington and Pennsylvania, have adopted ZEV regulations.

European Standards.In 2007, the Commission and the Parliament of the European Union (EU) adopted more stringent emission
standards for passenger
cars and light commercial vehicles which consist of two phases, Euro 5 and Euro 6. Euro 5 provides for lower emission levels for gasoline and diesel powered vehicles and also
extends the manufacturers' responsibility for emission performance to 160,000 kilometers. The primary focus of Euro 6 is to limit further emissions of diesel powered vehicles and bring them
down to a level equivalent to gasoline powered vehicles. The phase-in date for the Euro 5 standards was September 1, 2009, and the phase-in date for the
Euro 6 standards will be January 1, 2014.

The
EU Commission and the EU Parliament also adopted emission standards for heavy commercial vehicles for model years 2005 through 2007 (Euro IV) and model years 2008 and
thereafter (Euro V). In December 2008, the European Parliament agreed on Euro VI standards which require emission limits similar to the limits set by EPA 10 in the United States. The Euro VI standards
will apply to new heavy-duty vehicles with a reference weight

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above
2,610 kilograms beginning on December 31, 2012 and to all heavy-duty vehicles beginning on December 31, 2013. The new standards also extend the manufacturer's
responsibility for emission performance to 700,000 kilometers.

Vehicle Fuel Economy

U.S. Standards.The National Highway Traffic Safety Administration (NHTSA) establishes corporate average fuel economy (CAFE)
standards that require
manufacturers to meet certain fuel efficiency levels for their fleet of new passenger cars and light trucks sold in the U.S. The standards are intended to reduce U.S. dependence on foreign oil by
decreasing gasoline consumption. A manufacturer is subject to significant penalties for each model year its vehicles do not meet the standards. The CAFE standard for passenger cars is currently 27.5
miles per gallon. Up to model year 2007, the standard for light-duty trucks, including minivans and sport utility vehicles, was 22.2 miles per gallon.

In
2006, the NHTSA adopted both "Reformed" and "Unreformed" light-duty truck CAFE standards. The Reformed standard is voluntary for model years
2008 - 2010 and mandatory for model year 2011. The Reformed standard sets a separate fuel economy target for each vehicle based on the vehicle's wheelbase and track width.
The CAFE standard applicable to a manufacturer is based on the fuel economy targets of each size category of vehicles the manufacturer produces, weighted by the distribution of production volumes
across the size categories.

In
model years 2008-2010, manufacturers may elect to use Unreformed CAFE (i.e., CAFE calculated under the current rule). Manufacturers making that election must meet a
fleet-average miles per gallon standard of 22.5 miles per gallon for model year 2008, 23.1 miles per gallon for model year 2009, and 23.5 miles per gallon for model year 2010.

The
NHTSA has also adopted, for the first time, CAFE standards for medium-duty passenger vehicles, which are defined as vehicles with a gross vehicle weight of between 8,501
and 10,000 pounds. This standard will apply beginning with the 2011 model year and will be calculated under the Reformed standard.

Finally,
the NHTSA has modified the definition of light truck. As a result, some of our vehicles that are currently classified as trucks may be re-classified as passenger
cars, which would require them to meet a higher CAFE standard.

In
the final CAFE rule for model year 2011, the NHTSA sets the passenger car target to 30.2 miles per gallon and the light truck fleet target to 24.1 miles per gallon, which results in a
combined target of 27.3 miles per gallon. Starting with model year 2011, the targets of passenger cars and light trucks are mandatory based on the individual footprint value of the respective vehicle.
The footprint value is described by a designated function and is combined to a sales weighted harmonic average passenger car or light truck fleet target. A manufacturer may earn credits by exceeding
the set CAFE standards. The carry-forward period is extended to five years and the carry-back period is left at three years. Credits could be traded between the different fleets of an
original equipment manufacturer (OEM) and also between different OEMs. Credits earned before 2011 can not be transferred.

In
2007, the U.S. Energy Independence and Security Act of 2007 (EISA), which imposes even more stringent fuel economy requirements, was enacted. The new legislation requires
manufacturers to achieve a fleet-wide average of 35 miles per gallon by 2020 with no exceptions. The legislation extends the credits for automakers producing flex-fuel vehicles
through 2019 and gives the agencies the authority to use attribute-based systems when setting vehicle fuel economy standards.

Although
we strive to meet the current and proposed U.S. domestic fleet CAFE standards for both passenger cars and light-duty trucks by introducing additional technological
features, we may not have been able to fully meet the current CAFE standards and may not be able to meet future CAFE standards with
the U.S. new passenger car and light-duty truck fleets we offer in the United States and may incur fines as a result.

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As
part of the EISA, the Department of Transportation (DOT) is required to initiate a National Academy of Science study to investigate technology, costs and other factors that influence
the fuel economy of heavy-duty commercial vehicles. The DOT commenced the study in December 2008. It is expected to be completed by March 2010. It is also expected that this study will be
used for a future rulemaking initiative by NHTSA that will likely start by the end of 2010.

In
the United States and other countries, there is also political pressure to increase fuel economy standards as a means of reducing carbon dioxide emissions. These emissions are said to
contribute to global warming, which is a matter of international concern. Although the United States withdrew from the Kyoto Protocol, it continues to consider ways to achieve reductions in fossil
energy use, including the new CAFE standards discussed above. Any of these or other measures could impose significant costs on us or limit the range of products that we are able to offer. In August
2008, in an effort to reduce greenhouse gases, the EPA released a Greenhouse Gas Advanced Notice of Proposed Rulemaking requesting manufacturers to provide information on how greenhouse gas emissions
from heavy-duty commercial vehicles could be reduced further.

California
is also attempting to limit emissions of carbon dioxide and other greenhouse gases through regulation of fuel economy standards. CARB regulations, enacted pursuant to a
California law (AB 1493), require automakers to reduce significantly greenhouse gas vehicle emissions starting with 2009 passenger car and light-duty truck models. Several other states
have adopted similar measures.

In
2008, California adopted the Global Warming Solutions Act (AB 32) which requires CARB to mandate the reduction of greenhouse gas emissions from heavy-duty
commercial vehicles. A first proposal on how to reduce such emissions was unanimously approved by the CARB board members, but some aspects remain subject to further evaluation.

A
coalition of states, cities and environmental groups brought a lawsuit seeking to establish that the EPA is authorized to regulate carbon dioxide emissions and to compel it to do so.
The U.S. Supreme Court decided that the EPA's argument that it did not have the authority to regulate greenhouse gases was unfounded. As a consequence, the President of the United States issued an
executive order (Executive Order No. 13,432) ordering the EPA to initiate a greenhouse gases rulemaking process. Following the Executive Order, the EPA and the NHTSA issued a joint proposal to
establish a new national program to regulate model years 2012 through 2016 passenger cars and light trucks. The NHTSA proposed new CAFE standards for those model years. In addition, the EPA proposed
national greenhouse gas (GHG) emission standards to be established under the Clean Air Act. Both standards would require manufacturers to achieve a fleet-wide
average of 35.5 miles per gallon (or 250 g/mi of carbon dioxide emissions) by 2016. This accelerates the standard set by EISA, which requires manufactures to achieve a fleet-wide average
of 35 miles per gallon by 2020. The EPA and the NHTSA rulemaking is expected to be finalized by April 2010. The EPA standard offers manufacturers greater flexibility than the NHTSA standard to meet
the targets by imposing less stringent standards on intermediate volume manufacturers through the 2015 model year and allowing credits for improvements in vehicle air-conditioning systems.
As a result, a manufacturer may meet EPA targets but not NHTSA targets. Not meeting CAFE targets may result in substantial fines. In addition, the EPA has the ability under the Clean Air Act to
prevent a manufacturer from selling vehicles in the U.S. if the EPA targets are not met.

Following
the U.S. Supreme Court ruling that the EPA has the authority to regulate greenhouse gases, California requested permission from the EPA to set its own state standard. For over
thirty years California has requested and always received from the EPA a waiver from the federal regulations allowing it to set state standards concerning pollution emissions. Lawsuits challenging the
right of states to regulate fuel economy were filed in state courts.

On
May 18, 2009, the President of the United States signed a memorandum of understanding with ten auto manufacturers including us. The agreement provides for the auto
manufacturers to drop all relevant lawsuits concerning fuel economy in return for California not enforcing its state GHG regulation from 2012 through 2016. On June 30, 2009, the EPA granted
California a waiver to allow the implementation of their state GHG regulation from 2009 through 2011. We were considered a large volume manufacturer in 2009 and are subject to the state

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GHG
regulation. We anticipate that we will meet the 2009 targets. Regardless of whether or not we will meet the 2009 targets, we do not expect that civil penalties will be assessed for the 2009 model
year. In 2010 and 2011, we anticipate that we will be recognized as an intermediate volume manufacturer, and, therefore, we do not expect to be subject to the state GHG regulation in those years. If,
however, California does not recognize us as an intermediate volume manufacturer, we may not achieve the 2010 and 2011 targets, and as a result, California could subject us to fines.

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 on average for new passenger cars sold in the European Union in 2008. Based on 1995 levels, that target represents an average reduction in passenger vehicle
fuel usage of 25%.

In
December 2008, the Parliament of the EU approved a new regulation which establishes parameters for setting mandatory average carbon dioxide emission standards for a manufacturer's
fleet of new vehicles sold in the EU member states. The new regulation provides for a significant reduction of carbon dioxide emissions.
The permissible average carbon dioxide levels will be determined pursuant to a formula which is based on vehicle mass. Further factors such as the availability from the relevant manufacturer of low
emission vehicles will be taken into consideration. The new levels of permissible carbon dioxide emissions will apply beginning in 2012. The share of a manufacturer's vehicles that have to meet the
new targets will increase each year until it reaches 100% in 2015. A manufacturer who fails to comply with its specific applicable average carbon dioxide emission target will have to pay a fine for
each newly registered vehicle that exceeds the manufacturer's target emission rates. The fine is calculated based on the degree by which the target emission rate is exceeded and the total number of
vehicles sold by the respective manufacturer. We expect to incur significantly higher research and development costs in order to meet these targets.

The
EU Commission is also considering setting binding carbon dioxide emission targets for vans not registered as passenger cars (so-called "N1-vehicles"). Initial
proposals based on the main principles of the passenger car legislation have been presented by the EU Commission.

The
EU Commission has also proposed a review of labeling rules as well as a voluntary "code of good practice" on car marketing and advertising in order to raise consumer awareness.

Some
EU member states have begun to revise their car tax laws to take into account carbon dioxide emission levels. This trend is expected to continue and could negatively impact our
sales and revenue.

Other countries.There is political pressure worldwide to reach national carbon dioxide emission reduction targets. For example,
China, Japan and
South Korea plan to establish tighter fuel economy standards in 2012 and 2015 to address climate change issues. An increasing number of countries, for example Canada, India and Mexico, also intend to
enact fuel economy regulations in the near future.

Vehicle Safety

U.S. Standards.The NHTSA issues federal motor vehicle safety standards covering a wide range of vehicle components and systems
such as airbags,
seatbelts, brakes, windshields, tires, steering columns, displays, lights, door locks, side impact protection, and fuel systems. We are required to test new vehicles and equipment and certify their
compliance with the standards before selling them in the U.S. We are also required 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.

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These standards add to the cost and complexity of designing and producing vehicles and equipment. In recent years, the NHTSA has mandated, among other things:



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. For
example, China has established extensive and complex vehicle certification procedures that became fully applicable in 2009.

European Standards.Vehicles sold in Europe are subject to vehicle safety regulations established by the EU or by individual
countries that are
comparable to those in the U.S. Major regulatory changes in Europe are:



In
addition, within the framework of the United Nations Economic Commission for Europe (UNECE), the EU may establish new vehicle safety regulations (for example, regulations regarding
head restraints).

Stationary Source Regulation

Our assembly, manufacturing and other operations in the United States must meet a substantial number of regulatory requirements under
various federal and state laws. Together these laws severely restrict airborne and waterborne emissions, discharges of pollutants, and the disposal of wastes from our facilities, as well as the
handling of hazardous materials. These requirements may require us to install additional monitoring and other pollution control equipment, which would be costly. Similar requirements apply to our
operations outside the U.S.

Other Environmental Matters

Pollution remediation is 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 ten principal sites. Our German manufacturing facilities are also subject to significant noise restrictions.

Pollution
remediation is also a potential significant issue for our non-German production companies. In general, estimates of future costs of 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 collectability of remediation costs among responsible parties. We establish provisions for these environmental matters when the loss is
probable and reliably estimable. It is possible that final resolution of some of these matters may require us to make expenditures in excess of established provisions, over an extended period of time
and in a range of amounts that we cannot reliably estimate. Although final resolution of any such matters could have a material effect on our consolidated operating results for the particular
reporting period in

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which
an adjustment of the estimated provision 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 on 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 EU and imposes additional costs on automobile manufacturers which could be significant. 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 impact generally associated with the type of manufacturing
operations we conduct. We have established environmental management systems in both our plant operations and our development departments that are designed to consider the environmental impact 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.

Design Protection

On September 14, 2004, the EU Commission proposed 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. To date, a blocking minority of several EU member states opposed to the amendment has
prevented the EU Commission from implementing it.

DESCRIPTION OF PROPERTY

We produce vehicles and related components at approximately sixty-five manufacturing facilities worldwide, of which
seventeen are located in Germany and sixteen in the United States. Most of the remaining facilities are in Japan, Mexico, France, Spain, Brazil, South Africa and Turkey. We also have other properties,
including office buildings, sales and service locations as well as research laboratories, development centers and test tracks. We own most of these facilities, and we believe that they are adequate to
meet our needs.

Our
property, plant and equipment includes buildings, technical equipment, and other equipment capitalized under capital lease agreements. For additional information, please refer to
Note 10 to our Consolidated Financial Statements.

We
are party to various joint ventures, assembly contracts and other arrangements that allow us to gain access to additional production capacity, utilize our plants more efficiently or
gain access to new geographic markets. For example, we have joint ventures in China for the production and distribution of Mercedes-Benz passenger cars and vans and, in January 2009, we
signed a cooperation agreement to form a joint venture in China for the production of medium- and heavy-duty trucks. This joint venture remains subject to approval by the Chinese
authorities. We also have arrangements with third parties to assemble some of our vehicles at facilities in Austria. Pursuant to an agreement with Volkswagen, we assemble a Volkswagen van at our
German plants.

In
October 2008, we entered into a contract with the Ministry for National Development and Economy of the Republic of Hungary to establish a production plant for
Mercedes-Benz passenger cars in Kecskemèt, Hungary. We estimate total expenditures for this investment to be approximately €0.8 billion. We plan to
complete construction of the plant and start production in 2013.

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There
has been significant production overcapacity in the worldwide automotive industry for some time, which has become even more pronounced as a result of the global economic downturn.
This overcapacity threatens the continued profitability of many manufacturers. As part of our strategic planning and operations, we monitor our production capacity in relation to developing and
anticipated industry changes and market conditions. As these conditions fluctuate, we adjust our capacity by opening, closing, selling, expanding, or downsizing production facilities, or by adding or
eliminating work shifts. For example, in 2008 and 2009, we adopted wide-ranging plans to optimize and reposition the business operations of our subsidiaries Daimler Trucks North America
(DTNA) and Mitsubishi Fuso Truck and Bus Corporation (MFTBC), including the shutdown of select manufacturing plants. In response to decreasing unit sales, we also reached agreements with the works
councils of all of our manufacturing plants in Germany to reduce the number of hours worked per week (Kurzarbeit) during 2009 by the workers in those
plants. In the first two quarters of 2010, we plan to continue theKurzarbeitregime in select German manufacturing plants and we may continue that
regime, or even expand it to include other plants, if economic conditions remain weak or deteriorate further. For more information on the plans to optimize and reposition the business operations of
DTNA and MFTBC, please refer to "Description of Business Segments  Daimler Trucks" in "Item 4. Information on the Company." For more information on the temporary work hour
adjustments, please refer to "Employees and Labor Relations" in "Item 6. Directors, Senior Management and Employees."

Item 4A. Unresolved Staff Comments

None.

Item 5. Operating and Financial Review and Prospects.

INTRODUCTION

Cautionary Statement Regarding Forward-Looking Statements

This document 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:



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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.

You
should read the following discussion of our critical accounting policies and our financial condition and operating results together with our Consolidated Financial Statements
included in this annual report. These Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and related interpretations issued by
the International Accounting Standards Board. Please refer to Note 1 to our Consolidated Financial Statements for a description of our significant accounting policies.

On
August 3, 2007, we transferred an 80.1% controlling interest in the Chrysler automotive activities and the related Chrysler financial services business in the NAFTA region (the
Chrysler activities) to a subsidiary of Cerberus. As a result of that transaction, revenue and operating results of the Chrysler activities from January 1, 2007 to August 3, 2007 are
included in the line item "Net profit (loss) from discontinued operations" in our consolidated statements of income (loss). We do not include amounts relating to discontinued operations in our segment
reporting. Following the consummation of the transaction, we de-recognized the assets and liabilities of the Chrysler activities on August 3, 2007. For further information, please
refer to Notes 2 and 31 to our Consolidated Financial Statements.

In
June 2009, based on a binding term sheet signed in April 2009, we entered into a redemption agreement regarding our remaining 19.9% non-controlling equity interest in
Chrysler Holding LLC. As a result of the redemption, Daimler no longer holds an equity interest in Chrysler Holding LLC or any of its subsidiaries and all Daimler designees resigned from
the board of Chrysler Holding LLC and the boards of any of its subsidiaries. Please also refer to the discussion under the heading "Material Contracts" in "Item 10. Additional
Information." For additional information on the effect of the redemption on our Consolidated Financial Statements, please refer to the discussion below under the heading "Operating Results" and to
Note 2 to our Consolidated Financial Statements.

From
August 4, 2007 through the date of redemption on June 3, 2009, we accounted for our non-controlling equity interest in Chrysler Holding LLC with a
three-month time lag using the equity method of accounting. During that period we included our proportionate share of the consolidated results of Chrysler Holding LLC in the reconciliation from
total segment EBIT to Group EBIT.

If
we account for an equity investee with a time lag, IFRS requires us to consider significant transactions and events which affect the equity investee during the lag period.

As
a result of fluctuations in the exchange rate of the euro, which is the reporting currency of our Consolidated Financial Statements, in relation to several other world currencies,
including the U.S. dollar, all of our subsidiaries and equity investees that report their results in a functional currency other than the euro experienced currency translation effects. These currency
translation effects impact the year-to-year comparability of our consolidated financial statements for the periods presented in this annual report.

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Fluctuations
in the exchange rates of the U.S. dollar, the British pound, the Japanese yen, the Chinese yuan 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-Benz Cars segment,
which generates a significant portion of its revenue in foreign currencies and incurs manufacturing costs primarily in euros. Our Daimler Trucks segment is also subject to transaction risk, but only
to a minor degree due to its global production network. Mercedes-Benz Vans and Daimler Buses are also directly exposed to transaction risk, but only to a smaller degree compared to the
Mercedes-Benz Cars segment. In addition, we have some indirect transaction risk exposure through our equity method investments, most importantly our equity interest in EADS. In 2009, 2008
and 2007, currency effects, including effects from currency translation, operating business transactions and hedging activities, negatively affected our operating results.

Please
refer to the description under the heading "Exchange Rate Risk" in "Item 11. Quantitative and Qualitative Disclosures about Market Risks" and to Note 30 to our
Consolidated Financial Statements for additional information on our currency translation risk and transaction risk exposures.

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 new
accounting pronouncements that we had not yet adopted by December 31, 2009.

INFLATION

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. While we believe that any assumptions we use are appropriate, estimated
amounts could differ from what occurs in future periods.

Recovery of Carrying Amount of Equipment on Operating Leases

We own equipment, primarily passenger cars, trucks, vans, and buses, that we lease to customers under operating leases. At
December 31, 2009 and December 31, 2008, the total carrying value of this equipment was €18.5 billion and €18.7 billion, respectively. Of
the carrying amount of total equipment on operating leases as of December 31, 2009 and December 31, 2008, approximately 48% and 55%, respectively, are included in the assets of our
Daimler Financial Services segment, approximately 37% and 28%, respectively, are included in the segment assets of Mercedes-Benz Cars, approximately 7% and 8%, respectively, are included
in the Daimler Trucks segment assets, approximately 5% and 6%, respectively, are included in the segment assets of Mercedes-Benz Vans, and approximately 3% and 3%, respectively, are
included in the assets of Daimler Buses.

We
carry equipment on an operating lease initially at its acquisition or manufacturing 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 price we would obtain from the sale of the leased asset. We base our initial
estimate on publicly available information and also on our own projections that we derive from our historical experience regarding expected resale values for the types of equipment leased.

It
is our accounting policy to re-evaluate our estimates frequently and to consider, at least quarterly, our estimates of residual value and our ability to recover the
carrying value of our investment in equipment on operating leases. We determine the recoverable amount for an individual leased asset as the present value of the

39

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amount
that we expect to derive from the lease and the ultimate sale of the leased asset. If, as a result of our evaluation, we conclude that the estimated residual value of the leased asset is lower
than our previous estimate, we adjust depreciation prospectively to compensate for the expected shortfall, assuming we can still recover our investment. If the carrying value exceeds the recoverable
amount, we record an impairment charge equal to the excess of the carrying value over the recoverable amount.

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:



In
2008, as a result of lower than expected residual values, we recorded pre-tax impairment charges of €465 million which we allocated to the
Mercedes-Benz Cars segment.

If
economic conditions deteriorate in our primary markets, resale prices of used vehicles and, correspondingly, the residual values of our leased equipment may experience 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 with our Daimler Financial Services segment, the vehicle segment that manufactured the
leased equipment carries most of the residual value risk associated with our operating leases pursuant to a risk sharing agreement between it and our Daimler Financial Services segment. The terms of
the risk sharing arrangements vary by segment and geographic region.

We
record expenses arising from changes in estimates of residual values in the line item "Cost of sales" in our statements of income (loss). 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, our vehicle businesses account for sales of vehicles with a guaranteed minimum resale value, such as sales to certain rental car company customers, as operating leases.
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 expense.

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, trucks, vans and buses. Our Daimler Financial Services segment holds 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 passenger cars, trucks, vans and buses securing
these receivables may be insufficient, after selling costs, to realize the full carrying amount of the receivables. Once the collectibility risk materializes, we adjust our allowance for credit
losses.

40

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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, primarily taking into consideration 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
considering the fair value of available collateral. Increases in the allowance for credit losses reduce the net
carrying value of the balance sheet line item "Receivables from financial services" with a corresponding charge to the statement of income (loss) line item "Cost of sales."

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



Since
the risk associated with the collectibility of sales financing and finance lease receivables is exclusively attributable to our Daimler 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, 2009: 0.7% for the Mercedes-Benz Cars segment, 1.4% for the Daimler Trucks segment, 0.7% for the Mercedes-Benz
Vans segment and 0.2% for our Daimler Buses segment. However, additional provisions may be necessary if:



Future
credit losses may exceed current estimates, especially if economic conditions worsen in our primary markets. In addition, if economic conditions worsen, resale prices of used
vehicles and, correspondingly, the collateral value of our Daimler Financial Services segment's sales financing and finance lease receivables may
experience downward pressure. If these factors require a significant increase in the allowance for credit losses, it would negatively affect our Daimler Financial Services segment's and the Group's
future operating results.

We
are also exposed to residual value risk with respect to our finance lease receivables.

At
December 31, 2009, the sales financing and finance lease receivables shown in our consolidated balance sheet totaled €38.5 billion compared to
€42.4 billion at December 31, 2008.

The
allowance for credit losses associated with sales financing and finance lease receivables at December 31, 2009 amounted to €1.2 billion
(December 31, 2008: €0.9 billion). Cost of Sales in our consolidated statements of income (loss) for each of 2009, 2008 and 2007 include charges, net of reversals, of
€0.7 billion, €0.6 billion and €0.3 billion, respectively, resulting from adjustments in the allowance for credit losses. The total
expense relating to impairment losses on receivables from financial services amounted to €0.9 billion in 2009 (2008: €0.7 billion; 2007:
€0.5 billion).

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.

41

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Decreases
in collateral values would generally impact our future cash flows only if customers default and we have to repossess the vehicles.

If
we sell receivables from our financial services business, for instance through asset backed security transactions, these transactions, in general, do not meet the criteria for
de-recognition under IFRS and remain on our balance sheet and are included in the figures reported above. Our exposure to credit risk for those "sold" receivables which continue to be on
our balance sheet is similar to the credit risk exposure inherent in those receivables from financial services which have not been "sold" and transferred.

Provisions 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 provisions for product
warranties cover, for example, our various contractual warranty programs, "goodwill" coverage, recall campaigns and buy-backs which could result from regulatory requirements. Our product warranties
are generally consistent with commercial practices within the automotive industry. We record a provision 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 upon lease inception. The amount of the provisions for product warranties, which is included in the balance sheet line item "Provisions for other risks,"
with a corresponding charge included as a component of "Cost of sales" of our continuing operations in the statements of income (loss), reflects our estimate of the expected future costs of fulfilling
our obligations under the respective warranty plans. In addition, we state our provisions for product warranty at present value using a discount rate, which we determine quarterly. Our warranty
provisions affect all our vehicle businesses. At December 31, 2009 and December 31, 2008, our total accrued liabilities for product warranties were €5.5 billion
and €5.9 billion, respectively.

We
base our estimates for accrued warranty costs primarily on historical warranty claim experience. 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 service actions or recall campaigns. Since we have to use a variety of assumptions when we develop
estimates for accrued warranty costs, our estimated warranty obligations can vary depending upon the assumptions used.

We
believe that the determination of our provisions for product warranties is a critical accounting estimate for each of our vehicle businesses because:



The
recording of the warranty provisions initially has no impact on our operating cash flows.

Our
operating cash flows change as we pay or settle actual warranty claims. Our liquidity and capital resources could be negatively impacted if actual warranty costs exceed our
estimates.

Pension Benefits

As more fully described in Note 21 to our Consolidated Financial Statements, we provide pension benefits to substantially all of
our employees. Most of our pension benefit plans are defined benefit plans. Since the end of 2008, the majority of the active employees are entitled to pay-related defined pension
benefits. Under these plans, employees earn benefits for each year of service. The benefits earned per year of service are based on the salary

42

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level
and age of the respective employee. 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 or other assets) to our pension benefit plans from time to time to satisfy minimum funding requirements under applicable laws or otherwise to be able to pay
our obligations with respect to such benefits as they become due. These contributions are invested by the plans as described below. We actuarially determine our net pension benefit cost and
obligations using the projected unit credit method, and the amounts calculated depend on a variety of assumptions which primarily vary according to the economic conditions in the country in which the
pension plans are situated.

At
December 31, 2009, the present value of our defined pension benefit obligations exceeded the present value of plan assets on the Group level, which represents the"underfunded
status" of our plans, by €5.9 billion. For the year ended December 31, 2009, total net pension benefit cost was €0.5 billion. We estimate that our
total net pension benefit cost will increase by €0.1 billion in 2010.

We
determine our net pension benefit costs at the beginning of each calendar year based on various assumptions and data updates in actuarial models that measure pension benefit cost and
plan assets and liabilities. Actual results usually differ from our assumptions due to changing economic and other factors, resulting in actuarial gains or losses. In accordance with IFRS, we
accumulate these actuarial gains and losses, but do not immediately recognize them in our consolidated financial statements. Rather, we record the amortization of any such unrecognized cumulative
actuarial gains and losses in our financial statements in accordance with the "corridor approach." This approach requires partial amortization of actuarial gains and losses in the current year if
unrecognized gains and losses in the prior year exceeded ten percent of the
greater of (1) the defined pension benefit obligation under the relevant plan or (2) the fair value of the plan assets. If either of these tests is satisfied, the amortization amount we
recognize is equal to the resulting excess divided by the average remaining service period of active employees expected to receive benefits under the relevant plan. Prior service costs resulting from
retrospective plan amendments are immediately recognized in our consolidated statements of income (loss) if the underlying benefits are vested. If the benefits are not yet vested, prior service costs
are instead amortized on a straight-line basis over the average remaining period until the benefits become vested.

The
two most critical assumptions affecting the calculations of net pension benefit cost and defined pension benefit obligations are the discount rates and expected long-term
rate of return on plan assets. We evaluate these critical assumptions at least annually on a plan- and country-specific basis. Other assumptions, if they are part of the benefit formula,
such as retirement age, mortality rates, employee turnover rates, and long-term compensation rates, are evaluated also annually and updated to reflect actual historical experience and
future expectations.



For each year we calculate the present value of future cash outflows arising from our defined pension benefit plans using a discount
rate. We determine the discount rates for our defined pension benefit plans as of December 31 (the measurement date) of the relevant year based on market yields of high-quality
corporate bonds with terms and amounts of payments comparable to the terms and amounts of our projected pension payments. A lower discount rate increases the present value of defined benefit
obligations.

In
order to reflect decreases in yields on European corporate bonds in 2009, we decreased the discount rate for all significant German pension plans from a weighted average 5.9% as of
December 31, 2008, to 5.3% as of December 31, 2009. For all significant non-German plans, we increased the weighted-average discount rate slightly from 5.0% as of
December 31, 2008, to 5.1% as of December 31, 2009.



Pension plan assets are primarily comprised of equity and debt securities and, to a lesser extent, of real estate and alternative
investments. We determine the expected rate of return for pension assets after taking into account a variety of factors, including current asset allocations and expected future returns for various
asset

43

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classes.
Each year, our investment committees survey banks and large asset portfolio managers regarding their expectations of future returns for 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 weighted average
return expectation serves as an initial indicator of the expected rate of return on plan assets for each of the pension funds.

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 significant non-German plan assets for 2009, 2008, 2007 and 2006, were as follows:

Rates of Return 
German Plans

Rates of Return 
non-German PlansActual

Expected

Actual

Expected2009


5.1
%

6.5
%

13.6
%

7.2
%2008


(22.8
)%

6.5
%

(19.9
)%

7.3
%2007


5.5
%

7.5
%

9.8
%

8.5
%2006


9.5
%

7.5
%

15.6
%

8.5
%


For 2010, the expected rates of return on plan assets are 5.5% for German plans and 7.2% for significant non-German plans.



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, 2009:

(€ in millions)2009 actual return on plan assets +/- 5 percentage points


+/-5012009 discount rate +/- 25 basis points


+/-532


In
addition to the estimated increase in our total net pension benefit cost of €0.1 billion in 2010, the following table shows the effect on our 2010 net pension
benefit cost (before income tax benefits) of assumed changes in the discount rate and the expected long-term rate of return on plan assets:

(€ in millions)2009 discount rate +/- 25 basis points


+/-332009 expected long-term rate of return on plan assets +/- 50 basis points


+/-51


This sensitivity analysis indicates that changes in the factors described above can have a significant effect on the funded status of our pension
benefit plans and on our future net profit (loss). For a discussion of our pension benefit plan funding obligations and their potential impact on our liquidity and capital resources, please refer to
"Liquidity and Capital Resources - Benefit Plan Obligations and Costs" in "Item 5. Operating and Financial Review and Prospects."

Useful lives of property, plant and equipment

We depreciate the cost of our long-lived assets using a systematic and rational allocation method over the period during
which the long-lived assets are expected to provide benefits (useful life), taking into consideration any expected salvage value. Our total depreciation for property, plant and equipment
from continuing operations in 2009 and 2008 was €2.4 billion and €2.2 billion, respectively.

44

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We
believe that the determination of the useful lives of long-lived assets is a critical accounting estimate because:



In
recent years, all of our industrial business segments were confronted with increasing worldwide competition. We are exposed to increasing competitive pressure, technological pressure
and pressure from international capital markets. In this environment, profitable production calls for platform strategies and the use of identical parts and modules. The need to improve cars and
components is also driven by differing legal requirements regarding, for example, emission regulations, fuel consumption (fleet consumptions), or safety regulations. Factors like these gradually
influence how we use our long-lived assets for our development, procurement and production over time.

In
addition, in order to improve the profitability of our businesses, we have made or initiated far-reaching changes over recent years regarding the strategy and organization
of our Group. We also modified our investment policies and redesigned our strategies regarding procurement, development and production to streamline modules and platforms as well as development and
production processes.

These
strategic decisions have changed the nature and use of our long-lived assets and may continue to do so in the future. For example, in light of these changes we
reassessed and adjusted the useful lives of long-lived assets in 2007 in order to reflect the changing business environment. Due to this change in estimate, profit before income taxes in
2007 increased by €0.9 billion.

Capitalized development costs

Under International Accounting Standard (IAS) 38, development costs incurred for products under development must be capitalized and
recognized as intangible assets if the conditions for capitalization defined in IAS 38 are met. These conditions include the commercial and technical feasibility to use the products under
development and the probability to generate future economic benefits with each of those products. Capitalized development costs include all direct costs and allocable overhead.

We
believe that the accounting of capitalized development costs requires critical accounting estimates because:



We
continuously assess our development projects to identify those projects which meet the conditions of an intangible asset and determine the amounts to be capitalized as intangible
assets. This assessment is based on the nature and status of each product and estimated future cash flows to be generated from such project under development which require capitalization. If we cannot
reliably demonstrate that a project will generate probable future economic benefits to us, which means the project does not meet our minimum return requirements, we do not capitalize the development
costs for such project and expense the costs as incurred. We determine, at least annually, the recoverability of capitalized development costs for projects which have not been completed because

45

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the
products to be developed are not yet available for sale. We amortize capitalized development costs for projects which have generated products that are already available for sale on a systematic
basis over the expected product life cycle (2 to 10 years).

Impairment of Cash Generating Units and Equity Method Investments

According to the requirements of IAS 36, we test the carrying amounts of the assets of our cash-generating units at
least once a year. These assets include goodwill, capitalized development costs for projects which have not yet been completed, property, plant and equipment and intangible assets with a definite
useful life. In addition, we may be required to test the assets of a cash-generating unit for impairment if there is an indication that its assets have been impaired.

Whenever
we test the respective cash-generating unit for impairment, we have to determine the recoverable amount. Impairment reviews are based on the most current projections
of future cash flows which we use to manage and control our businesses. The most significant judgments in determining recoverable amounts are the assumptions and estimates used to determine cash
inflows and outflows (for example, retail prices, sales volume and production costs) generated by the respective cash generating unit, the number of years on which the cash flow projections are based,
the terminal value and the discount rate used to calculate the present value of the recoverable amounts.

With
respect to our equity method investments, we evaluate the recoverable amounts of these investments when there is objective evidence that our investments are impaired. Examples of
such objective evidence that an investment may be impaired include, but are not necessarily limited to, significant financial difficulty of an
investee or, in the case of publicly traded equity securities of an investee, a significant or prolonged decline of the fair value of the investment, based on the quoted stock price.

When
objective evidence of a potential impairment is present, we evaluate the recoverable amount of the equity method investment by comparing the carrying amount of the investment to the
higher of the estimated fair value or value in use. We believe that the determination of the recoverable amount of our significant equity method investments is a critical accounting estimate because
the determination involves significant judgment regarding the future business prospects of these investments. We record an impairment charge on an equity method investment if the recoverable amount is
below the carrying amount of the investment. At December 31, 2009, our investments accounted for using the equity method amounted to €4.3 billion compared to
€4.2 billion at December 31, 2008. Based on the carrying amount, the most significant investments we recorded at December 31, 2009 relate to our investments in
EADS (€3.1 billion) and Tognum (€0.7 billion).

Since
the carrying amounts of our intangible assets and other assets tested for impairment within our cash generating units and our equity method investments are significant, an
impairment charge could in either case be material to our operating results in the year the impairment charge is recorded.

With
respect to our accounting policies regarding the measurement of equipment under operating lease and sales financing and finance lease receivables, please refer to the respective
accounting policies above.

OPERATING RESULTS

At the beginning of 2009, we made some changes to our segment reporting. We now separately present the business activities of
Mercedes-Benz Vans and Daimler Buses, which we previously reported as part of Vans, Buses, Other. We include our other business interests which we previously reported as part of Vans,
Buses, Other, consisting primarily of our equity investments in EADS and Tognum, in our reconciliation from total segment EBIT to Group EBIT, together with corporate items and eliminations of
intersegment transactions. We have adjusted 2008 and 2007 figures to reflect this change in segment reporting. From August 4, 2007 through June 3, 2009, the date of redemption of our
remaining non-controlling equity interest in Chrysler Holding LLC, the reconciliation from total segment EBIT to Group EBIT also included our proportionate share in the results of
Chrysler Holding and other Chrysler-related gains and losses. For further information, please refer to the discussion under the

46

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heading
"Introduction" in "Item 4. Information on the Company." Following the adjustment of our segment reporting, we now report five segments: (1) Mercedes-Benz Cars,
(2) Daimler Trucks, (3) Mercedes-Benz Vans, (4) Daimler Buses and (5) Daimler Financial Services.

In
May 2008, the IASB published Improvements to IFRS which included an amendment to IAS 16 "Property, Plant and Equipment." Pursuant to this amendment, proceeds from the sale of
assets held for rental that occur in the ordinary course of activities must be recognized as revenue. We have applied the revised standard since January 1, 2009 and have adjusted the 2008 and
2007 revenue and cost of sales figures in the discussion below to make them comparable.

Information about EBIT

We measure the performance of our operating segments through a measure of segment profit (loss) which we refer to as "EBIT" in our
management and reporting system.

EBIT
comprises gross profit; selling and general administrative expenses; research and non-capitalized development costs; other operating income and expense; our share of
profit (loss) from investments accounted for using the equity method, net; and other financial income (expense), net. The segment information presented below does not include amounts relating to
discontinued operations and prior period figures of reported segments reflect the activities of continuing businesses only.

Our
consolidated EBIT is the sum of the EBITs of our segments, adjusted for reconciling items. Reconciling items include, as described above, gains and losses from our other business
interests not allocated to one of our reportable segments (primarily EADS and, through June 3, 2009, Chrysler), elimination entries made in the context of consolidation, and corporate items
which are not part of, or allocated to, any of our segments. Please also refer to Note 31 to our Consolidated Financial Statements for information on how we determine EBIT.

Overview of Business Segment Revenue and EBIT

You should read the following discussion in conjunction with Notes 1 and 31 to our Consolidated Financial Statements and the
discussions under the headings "Critical Accounting Policies" in this Item 5 and "Risk Factors" in "Item 3. Key Information."

The
following table presents revenue and EBIT for each of our five segments during the last three fiscal years.

Year Ended December 31,
(€ in millions)2009

2008

2007Revenue

EBIT1

Revenue

EBIT1

Revenue

EBIT1Mercedes-Benz Cars


41,318


(500
)

47,772


2,117


52,430


4,753Daimler Trucks


18,360


(1,001
)

28,572


1,607


28,466


2,121Mercedes-Benz Vans


6,215


26


9,479


818


9,341


571Daimler Buses


4,238


183


4,808


406


4,350


308Daimler Financial Services


11,996


9


11,964


677


10,967


630Total Segment revenue and EBIT


82,127


(1,283
)

102,595


5,625


105,554


8,383Reconciliation


(3,203
)

(230
)

(4,126
)

(2,895
)

(3,985
)

327Total


78,924


(1,513
)

98,469


2,730


101,569


8,710


1EBIT
includes expenses from compounding of provisions (2009: €1,003 million; 2008: €429 million; 2007:
€444 million).




The segment discussions below describe in more detail the specific factors which affected segment EBIT.

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.

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2009 Compared With 2008

Daimler Group



Group revenue decreased 20% from €98.5 billion in 2008 to €78.9 billion in 2009,
primarily as a result of lower unit sales of all our vehicle segments, partially offset by currency translation and transaction effects. You can find further details on the development of revenue of
each segment in the segment discussions below.



Cost of sales was €65.6 billion in 2009 compared to €76.9 billion in 2008, a 15%
decrease. Cost of sales developed in line with revenue. Cost savings achieved through permanent and temporary cost reductions, including personnel costs, and efficiency improvements, significantly
contributed to adjusting cost of sales in line with the drop in revenue. The gross margin, which is gross profit (revenue minus cost of sales) divided by revenue, fell from 21.9% in 2008 to 16.9% in
2009.



Selling expenses decreased from €9.2 billion to €7.6 billion in 2009, primarily as a
result of lower unit sales due to the economic downturn. Despite a number of steps taken to reduce costs and increase efficiency, selling expenses as a percentage of revenue were slightly higher than
in the prior year (9.6% in 2009 compared to 9.3% in 2008).



General administrative expenses declined 20% to €3.3 billion (2008: €4.1 billion). The
decline was primarily the result of strict cost management. As a percentage of revenue, general administrative expenses amounted to 4.2%, the same as in the prior year.



Research and non-capitalized development expenses were €2.9 billion in 2009 compared to
€3.1 billion in 2008. The reduction in these expenses partially reflects lower personnel and material expenses as a result of cost-cutting actions. Research and
non-capitalized development expenses as a percentage of revenue were 3.7% in 2009 compared to 3.1% in 2008. The Group's total research and development spending, including both capitalized
and expensed items, decreased by €0.2 billion (2009: €4.2 billion; 2008: €4.4 billion).



Other operating income was €0.7 billion compared to €1.2 billion in 2008. In 2009, other
operating income included a €0.1 billion refund of social security contributions as a result of reduced work hour arrangements at our production plants in Germany. Other
operating income in 2008 included a gain of €0.4 billion realized on the sale of our real estate properties at Potsdamer Platz.

Other
operating expense reached €0.5 billion, the same level as in the prior year. For additional information on the composition of other operating income and
expense, please refer to Note 5 to our Consolidated Financial Statements.



In 2009, our share of profit (loss) from investments accounted for using the equity method amounted to a net profit of
€0.1 billion (2008: a net loss of €1.0 billion). The year-to-year improvement mainly reflects the fact that our 2008 share was
burdened by a proportionate loss of €1.4 billion relating to Chrysler. Our proportionate share

48

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in
the net results of EADS decreased from a profit share of €0.2 billion in 2008 to a profit share of €0.1 billion in 2009.



Other financial expense, net, declined from €2.2 billion in 2008 to €1.3 billion in 2009.
In 2009, other financial expense included €0.3 billion of expenses related to agreements entered into in the context of the disposal of our remaining 19.9% interest in Chrysler
and charges arising from a decrease in discount rates for discounting non-current
provisions. Other financial expense in 2008 reflected charges of €1.7 billion arising from the impairment of loans extended to Chrysler entities and other Chrysler-related
assets.



In 2009, we had interest expense, net, of €0.8 billion compared to interest income, net, of
€0.1 billion in 2008. The main reason for the change was the fact that we maintained higher gross liquidity and increased our financing liabilities. In 2009, interest income
derived from investments was significantly lower than in 2008, while refinancing costs went up as a result of higher risk premiums on borrowings, primarily in the first half of the year. Lower
expected returns on pension plan assets also reduced the net interest result.



Income tax expense amounted to €0.3 billion in 2009 compared to €1.1 billion in 2008. We
computed income tax expense in 2009 based on a pre-tax loss of €2.3 billion and in 2008 based on pre-tax income of €2.8 billion.
The effective tax rate was -15% in 2009 and 39% in 2008.

The
negative effective tax rate in 2009 was mainly the result of impairments recognized on deferred tax assets at non-German subsidiaries and additional tax expense arising
from tax assessments and re-evaluations of tax provisions regarding prior years. The impairments and the additional tax expense offset the tax benefit resulting from our pre-tax loss.

The
effective tax rate in 2008 was approximately 9% higher than the expected tax rate. This was partially the result of impairments recognized on deferred tax assets at
non-German subsidiaries. In addition, pre-tax income in 2008 included losses related to our investments in Chrysler, not all of which were tax deductible. For further
information on income taxes, please refer to Note 8 to our Consolidated Financial Statements.



In 2009, we had a net loss from continuing operations of €2.6 billion compared to a net profit of
€1.7 billion in 2008. The change is primarily a reflection of a significant drop in EBIT (2009: €(1.5) billion; 2008: €2.7 billion).



In 2009, we had a net loss of €2.6 billion compared to net profit of €1.4 billion in
2008. These amounts include a net loss attributable to the shareholders of Daimler AG (excluding minority interests) of €2.6 billion in 2009 and a net profit of
€1.3 billion in 2008. Basic and diluted earnings per share in 2009, for losses attributable to shareholders of Daimler AG, amounted to €(2.63) and
€(2.63), respectively, compared to basic and diluted profit per share of €1.41 and €1.40, respectively, in 2008.



In 2009, we recorded Group EBIT of €(1.5) billion compared to €2.7 billion in 2008.

The
main reason for the decline was a significant drop in revenue due to markedly lower unit sales in all vehicle segments as a result of the global economic downturn. Cost savings
achieved through permanent and

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temporary
cost reductions and efficiency improvements realized through ongoing optimization programs could only partially compensate for the drop in revenue.

EBIT
in 2009 was also negatively affected by charges related to the realignment and repositioning of the business operations of our subsidiaries Mitsubishi Fuso Truck and Bus Corporation
(€0.2 billion) and Daimler Trucks North America (€0.1 billion), expenses relating to the sale of non-automotive assets subject to finance
leases and the valuation of such assets currently available for sale (€0.1 billion), additional expenses arising from agreements entered into in the context of the disposal of
our remaining 19.9% equity interest in Chrysler (€0.3 billion), and, to a lesser degree, currency effects. In addition, lower interest rates for discounting
non-current provisions (€0.4 billion) and a significantly higher annual contribution to the German Pension Protection Association
(€0.2 billion) contributed to the drop in EBIT.

EBIT
in 2008 reflected losses and impairment charges of €3.2 billion related to our investments in Chrysler, impairment charges recognized on the reassessment of
residual values (€0.5 billion), and expenses for the repositioning of Daimler Trucks North America (€0.2 billion). Gains from the sale of our real estate
properties at Potsdamer Platz (€0.4 billion), the transfer of EADS shares (€0.1 billion), and an amendment of a defined pension benefit plan
(€0.1 billion) had a positive effect on Group EBIT in 2008.

The
table above shows the business segment contributions to Group EBIT and the reconciliation from segment EBIT to Group EBIT.



Reconciliation from total segment EBIT to Group EBIT in 2009 primarily reflects Chrysler-related expenses. As a result of agreements
entered into in 2009 among Daimler, Chrysler, Cerberus and the Pension Benefit Guaranty Corporation in the context of the disposal of our remaining 19.9% equity interest in Chrysler, we incurred total
expenses of €0.4 billion, partially offset by gains resulting from the legal transfer of Chrysler's international sales activities to Chrysler LLC and valuation
adjustments regarding Chrysler-related assets (a total of €0.1 billion). For additional information regarding our investment in Chrysler and the related transactions, please
refer to Note 2 to our Consolidated Financial Statements. In 2008, Group EBIT was impacted by losses and impairment charges of €3.2 billion related to our investments in
Chrysler. On the plus side, we recorded a gain in 2008 of €0.4 billion on the sale of our real estate properties at Potsdamer Platz.

The
reconciliation to Group EBIT also includes our proportionate share in EADS's net results, which amounted to €0.1 billion in 2009 compared to
€0.2 billion in 2008. The lower earnings contribution in 2009 was partially the result of negative currency effects. In 2008, we realized a gain of
€0.1 billion from the transfer of EADS shares.

In
connection with recent developments in the negotiations regarding EADS's A400M military transporter program, EADS announced on February 17, 2010 that it will update the A400M
provision in its 2009 consolidated financial statements. This update will require certain critical assumptions and financial assessments to be made which were not finalized when our supervisory board
approved Daimler's 2009 Consolidated Financial Statements on March 1, 2010. Any future increase in that provision would negatively affect EADS's actual 2009 results and would also negatively
affect Daimler's proportionate share in EADS's results which will be reflected in Daimler's consolidated interim financial statements for the first three months of 2010. The resolution of this matter
could have a material negative effect on Daimler's earnings in the first quarter of 2010.

The
reconciliation further reflects corporate expenses of €0.2 billion (2008: €0.4 billion) and eliminations of transactions within the
Group (2009: income of 0.2 billion; 2008: income of €10 million). Corporate expenses in both years include expenses arising from workforce reductions in the Group's
administrative functions and expenses incurred in connection with legal proceedings that were not attributable to our segments.

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Segment Discussions



In 2009, both revenue and unit sales of our Mercedes-Benz Cars segment were 14% lower than in 2008. Revenue decreased from
€47.8 billion in 2008 to €41.3 billion in 2009, while total unit sales fell to 1,093,905 units compared to 1,273,013 units in 2008. The decrease in
revenue and unit sales primarily reflects the decline in demand caused by the global economic downturn. Sales of the S-Class (including Maybach) were 39% lower in 2009 compared to 2008,
and sales of our C-Class declined 28%, partially as a result of strong price competition in that segment, but also due to the repositioning of the CLK coupe as an E-Class coupe
in May 2009. Sales of the A-/B-Classes went down 14% compared to 2008, while unit sales of smart at 113,937 were 18% lower than in 2008. A 23% increase in unit sales of the
E-Class as a result of the full availability of the new models of the E-Class sedan, coupe and station wagon (since March, May and November 2009, respectively) and a 4%
increase in unit sales of the ML-/R-/G-/GL-/GLK-Classes to
167,153 vehicles due to the first time full availability (since the end of 2008) of the all new GLK-Class somewhat softened the impact of the sales declines experienced by our other
vehicle classes.

In
Germany, 2009 revenue of Mercedes-Benz Cars was 11% lower than in 2008, while unit sales declined 10%. With revenue of €11.0 billion, Germany
continues to be the most important market for our Mercedes-Benz Cars segment, representing 27% of the segment's worldwide revenue and 27% of total unit sales. In the other Western European
countries, revenue of Mercedes-Benz Cars decreased 20% from €13.4 billion in 2008 to €10.7 billion in 2009. Overall unit sales in those
countries were down 19%.

In
the United States, unit sales in 2009 were down 19% compared to 2008, while revenue declined 21% from €8.6 billion in 2008 to
€6.8 billion in 2009. Revenues in China increased significantly by 29% to €4.1 billion in 2009 as a result of solid economic growth and resulting high
demand for our passenger cars. In the rest of Asia (excluding China), revenue went down 16% compared to the prior year, reaching €3.7 billion in 2009, and unit sales declined
25%. The smaller decline in revenue was due to a more favorable model mix, especially increased demand for the new E-Class models, improved net pricing, and higher option equipment rates.

In
2009, EBIT of our Mercedes-Benz Cars segment was €(0.5) billion compared to €2.1 billion in 2008. The segment's return on sales
(calculated as EBIT divided by revenue) was (1.2)% (2008: 4.4%). The sharp drop in earnings was primarily due to significantly weaker demand for cars and the resulting drop in unit sales and a less
favorable product mix notwithstanding higher sales of the new E-Class models. The continued intense competition and pricing pressure in most of our primary sales markets and expenses
incurred for research and development work to reduce CO2 emissions of our vehicles further burdened 2009 EBIT. In addition, we incurred expenses of €0.1 billion as a result of
an agreement with McLaren Group Ltd. to change the form of our cooperation. Please refer to Note 34 to our Consolidated Financial Statements for further information. We also incurred
charges in 2009 of €0.1 billion in connection with residual-value guarantees provided to our dealers. The positive impact of cost savings achieved through permanent and
temporary cost reductions, efficiency improvements, the reassessment of product related provisions, and lower prices for raw materials and, to a smaller degree, favorable hedging rates could only
partially compensate for the significant drop in revenue.

In
2008, impairment charges of €0.5 billion related to the reassessment of residual values of leased vehicles negatively affected EBIT, while an amendment of a
defined benefit plan resulted in past service income (before income taxes) of €0.1 billion.



Revenue of our Daimler Trucks segment was €18.4 billion in 2009, a 36% decline compared to 2008. The drop in
unit sales, from 472,074 units in 2008 to 259,328 in 2009, was even more pronounced at 45%. The large decline in unit sales was mainly the result of significant sales declines in Western Europe, the
NAFTA region, the Middle East, Eastern Europe and Latin America. We also had large sales declines in Japan and Indonesia, which are key markets for our subsidiary Mitsubishi Fuso Truck and Bus
Corporation (MFTBC). The disproportionately

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smaller
decrease in revenue was primarily due to the fact that in almost all of our main markets revenue derived from vehicle maintenance and spare parts sales was not as strongly affected by the
global economic downturn as vehicle unit sales. Currency translation effects also had a positive impact on revenue.

In
the NAFTA region, revenue went down 28% from €6.7 billion in 2008 to €4.8 billion in 2009, while total unit sales declined 37% from
97,313 to 61,700 units. The drop in unit sales mainly reflects a further decline in demand in the United States commercial vehicle markets due to weak economic conditions. Revenue generated in the
United States represents 21% of total 2009 revenue achieved by our Daimler Trucks segment. The disproportionate development of revenue and unit sales in the NAFTA region was the result of favorable
currency translation effects and the fact that revenue derived from our spare parts and vehicle maintenance business did not decline at the same rate as revenue from vehicle sales.

In
Germany, revenue of Daimler Trucks decreased 35% from €5.7 billion to €3.7 billion. Unit sales were down 40%, from 41,597 in 2008 to
24,951 units in 2009. Revenue in Western Europe (excluding Germany) decreased 46% from €4.0 billion to €2.2 billion in 2009, while unit sales fell 57%,
from 45,145 in 2008 to 19,335 units in 2009. Revenue generated in Germany and in the remaining Western European market represent 20%, and 12%, respectively, of the segment's worldwide revenue.

Sales
in Asia (including Australia and the Middle East) decreased 44% from 164,765 vehicles in 2008 to 92,998 in 2009, while revenue was down 31% at €4.2 billion
in 2009 (2008: €6.1 billion). Lower unit sales in almost all Asian markets, but mainly in the Middle East, Japan and Indonesia, led to this development. Revenue in Asia
decreased at a lower rate than unit sales, mainly due to currency translation effects. Revenue generated in Asia represents 23% of total 2009 revenue achieved by Daimler Trucks worldwide. Unit sales
in Japan, which consisted primarily of sales by MFTBC, declined 45% from 42,035 in 2008 to 23,102 units in 2009, while revenue decreased 22% from €3.1 to
€2.4 billion. The declines in unit sales and revenue generally reflect the continuing weakness of the Japanese economy and a recognizable trend of persistently lower truck
demand in Japan. The disproportionately smaller decrease in revenue was primarily the result of the appreciation of the
Japanese yen against the euro and the fact that revenues derived from our spare parts and vehicle maintenance businesses did not decline at the same rate as revenue from vehicle sales.

In
Latin America, unit sales were 37% lower in 2009 compared to 2008 (37,069 units and 58,951 units, respectively). Revenue in that region decreased 32% from
€3.0 billion in 2008 to €2.1 billion in 2009. The somewhat smaller decrease in revenue was due to a more favorable product mix.

With
EBIT of €(1.0) billion and a return on sales (calculated as EBIT divided by revenue) of (5.5)%, the results posted by the Daimler Trucks segment were significantly
below the prior year (EBIT of €1.6 billion and return on sales of 5.6%). Lower unit sales of trucks caused by a drop in global demand for transportation services had a
substantial negative effect on earnings in 2009. In addition, unfavorable shifts in market and product mix also had a negative effect on 2009 EBIT. Charges of €0.2 billion in
connection with the plan presented in May 2009 regarding a comprehensive repositioning of the business operations of MFTBC and charges of €0.1 billion (2008:
€0.2 billion) relating to actions initiated in the prior year with respect to the repositioning of Daimler Trucks North America also contributed to the drop in EBIT. Positive
effects on earnings in 2009 resulted from the adjustment of personnel expenses and further efficiency improvements.



Primarily as a result of the global economic downturn, revenue and unit sales of our Mercedes-Benz Vans segment decreased
significantly. Compared to revenue of €9.5 billion in 2008, revenue in 2009 fell 34% to €6.2 billion. Revenue in 2009 includes
€0.6 billion from the production of a van for Volkswagen (2008: €0.9 billion). Worldwide unit sales of Mercedes-Benz Vans decreased 42% from
287,198 units in 2008 to 165,576 units in 2009. The sales of the vans produced for Volkswagen are not included in the unit sales of Mercedes-Benz Vans.

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In
Germany, revenue of Mercedes-Benz Vans decreased 22% from €3.6 billion in 2008 to €2.8 billion in 2009 while unit sales
decreased 21% from 74,036 units in 2008 to 58,185 units in 2009. Revenue in Western Europe (excluding Germany) decreased 40% from €3.7 billion in 2008 to
€2.2 billion in 2009, and unit sales in that region decreased 47%, from 133,101 units in 2008 to 69,949 units in 2009. Revenue generated in Germany and in
the remaining Western European markets represent 45% and 36%, respectively, of the segment's worldwide revenue in 2009.

In
the NAFTA region revenue dropped sharply from €0.5 billion in 2008 to €0.1 billion in 2009, a decline of 79%. Unit sales decreased at an
even higher rate of 88%, from 21,487 units in 2008 to 2,591 units in 2009. The discontinuation of a general distributor arrangement with Chrysler regarding the distribution of our vans and, to a
lesser degree, a decline in demand due to economic conditions were the primary contributors to this decline. The disproportionately smaller decline in revenue was due to improved pricing and the fact
that revenues derived from our spare parts and vehicle maintenance businesses did not decline at the same rate as revenue from vehicle sales.

In
2009, the Mercedes-Benz Vans segment recorded EBIT of €26 million compared to prior year EBIT of €0.8 billion. The segment's
return on sales (calculated as EBIT divided by revenue) was 0.4%, compared to 8.6% in 2008. Significantly lower unit sales in all geographic markets as a result of general economic conditions were
largely responsible for this development. Although Mercedes-Benz Vans implemented extensive countermeasures, these measures only partially moderated the decline in earnings.



Revenue of our Daimler Buses segment decreased 12% from €4.8 billion in 2008 to
€4.2 billion in 2009.

Worldwide
unit sales reached 32,482 units, a 20% decline compared to the high sales level in 2008 (40,591 units). The disproportionately smaller decrease in revenue was primarily the
result of a comparatively smaller decline in unit sales of complete buses in the European bus markets.

In
Western Europe, revenue decreased 8% from € 2.3 billion in 2008 to €2.1 billion in 2009. Revenue in Germany, our home
market, fell 4% to €1 billion. As a result of the weakening bus markets in Western Europe, unit sales decreased 7% to 7,219 units in 2009 (2008: unit sales of 7,766), while unit
sales in Germany declined 9% to 2,831 units in 2009. Especially unit sales of coaches were affected by weaker market conditions, while unit sales of city buses increased 7% compared to the prior year.
Revenue in Western Europe represents 50% of total 2009 revenue of Daimler Buses.

In
Latin America, revenue decreased from €0.9 billion in 2008 to €0.7 billion in 2009 after a strong revenue development in 2008, mainly
reflecting the lower market demand in that region. Sales of chassis decreased by 16% from 19,467 units in 2008 to 16,286 units in 2009.

In
the NAFTA region, revenue decreased 3% to €0.7 billion in 2009 and unit sales went down 44% from 6,997 units in 2008 to 3,899 units in 2009. Revenue in the
United States and Canada increased from €0.4 billion in 2008 to €0.5 billion in 2009, primarily as a result of higher unit sales of Orion buses, including
a significant number of hybrid models. In Mexico, revenue went down 46% due to a significant drop in unit sales from 6,057 units in 2008 to 2,736 units in 2009 as a result of general economic
conditions.

Daimler
Buses achieved EBIT of €0.2 billion, representing a return on sales (calculated as EBIT divided by revenue) of 4.3% despite the worldwide economic crisis
(2008: EBIT of €0.4 billion and return on sales of 8.4%). Earnings decreased primarily due to lower unit sales, reflecting the general market development. In addition, higher
research and development expenses and unfavourable hedging rates further burdened EBIT in 2009, partially offset by efficiency improvements.

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In 2009, revenue of our Daimler Financial Services segment amounted to €12.0 billion, approximately the same
level as in 2008. Revenue in 2009 reflects favorable currency translation effects and a €0.1 billion increase in revenue derived from the resale of vehicles coming off lease.

Revenue
derived from activities of our Daimler Financial Services segment in the NAFTA region (including Capital Services USA) was €6.0 billion, representing 50%
of total segment revenue in 2009, which is comparable to last year's share of 48%. In Germany, Daimler Financial Services achieved revenue of €2.8 billion, or 24% of total
revenue, compared to €2.7 billion, or 22% of total revenue, in 2008. Revenue derived from financial services activities in Western Europe (excluding Germany) amounted to
€1.8 billion, or 15% of total revenue, compared to €2.3 billion, or 19% of total revenue, in 2008.

In
2009, the Daimler Financial Services segment originated new leasing and finance contracts with a total value of €25.1 billion compared to
€29.5 billion in 2008, a 15% decrease. At December 31, 2009, our Daimler Financial Services segment managed a portfolio of leasing and finance contracts of
€58.3 billion, an 8% decrease over the comparable portfolio of €63.4 billion managed at December 31, 2008. Excluding currency translation effects,
the portfolio value in 2009 was 9% lower than in the prior year. The decline in new leasing and finance contracts and the lower portfolio value primarily reflect the decrease in unit sales in all our
vehicle segments.

In
2009, Daimler Financial Services had EBIT of €9 million (2008: €0.7 billion). The negative earnings trend was primarily the result of
increased cost of credit risk. The decline in 2009 EBIT also reflects charges of €0.1 billion relating to the sale of non-automotive assets subject to finance leases
and the valuation of such assets currently available for sale. Efficiency improvements had a positive effect on EBIT in 2009.

2008 Compared With 2007

Daimler Group



Group revenue in 2008 was €98.5 billion, 3.1% lower than in the prior year (2007:
€101.6 billion). Further details on the development of revenue for each segment are provided under the segment discussions below.



Cost of sales was €76.9 billion in 2008 compared to €77.6 billion in 2007, a 0.9%
decrease. The decrease in cost of sales, which was less than the decrease in revenue, is mainly the result of lower sales of passenger cars, lower expenses due to efficiency gains and currency
translation effects. The gross margin decreased from 23.6% in 2007 to 21.9% in 2008.



Selling expenses increased from €9.0 billion in 2007 to €9.2 billion in 2008. As a
percentage of revenue, selling expenses represented 9.3% in 2008 compared to 8.8% in 2007. The increase is partially a reflection of impairments recognized on trade receivables and expenses relating
to the measures initiated in 2008 to optimize and strengthen the business operations of Daimler Trucks North America (€0.1 billion).



General administrative expenses increased 2.5% to €4.1 billion (2007: €4.0 billion). This
increase was primarily due to expenses relating to the measures initiated in 2008 to optimize and strengthen the business operations of Daimler Trucks North America
(€0.1 billion). Higher expenses for consulting and IT services were compensated by cost savings achieved through ongoing efficiency programs. As a percentage of revenue, general
administrative expenses were 4.2%, an increase of 0.2%, mainly due to lower revenue in 2008.

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Research and non-capitalized development expenses amounted to €3.1 billion in 2008 (2007:
€3.2 billion), or 3.1% as a percentage of revenue in 2008 and 2007. The Group's total research and development spending, however, including both capitalized and expensed items,
increased considerably over last year (2008: €4.4 billion; 2007: €4.1 billion).



Other operating income increased to €1.2 billion (2007: €0.7 billion), of which
€0.4 billion relate to gains realized in 2008 on the sale of our real estate properties at Potsdamer Platz. In 2007, other operating income included a gain of
€0.1 billion from the sale of real estate.

Other
operating expense decreased to €0.5 billion (2007: €0.7 billion). We had lower expenses in connection with legal proceedings in 2008.

You
can find further details about the composition of other operating income and other operating expense in Note 5 to our Consolidated Financial Statements.



In 2008, our share of profit (loss) from investments accounted for using the equity method was a net loss of
€1.0 billion (2007: a net profit of €1.1 billion). The main reason for the sharp decline was our proportionate share in the net loss of Chrysler (2008: a
net loss of €1.4 billion; 2007: a net loss of €0.4 billion). The decrease was also partially due to the fact that 2007 included significantly higher gains
in connection with the transfer of portions of our equity interest in EADS (2008: €0.1 billion; 2007: €1.5 billion). Our proportionate share in the net
profit of EADS improved to €0.2 billion in 2008 (2007: €13 million).



Other financial expense, net, increased from €0.2 billion in 2007 to €2.2 billion in
2008. A €1.7 billion portion of this increase reflects the impairment of loans and other Chrysler-related assets. In addition, the prior-year result included a gain
of €0.1 billion from the mark-to-market valuation of derivative transactions entered into in connection with the transfer of portions of our equity
interest in EADS.



In 2008, we had interest income, net, of €0.1 billion (2007: €0.5 billion). The decline
of the net interest result is due to higher interest expense and lower interest income caused by our lower average liquidity in the year 2008. Other factors with a negative effect in 2008 were lower
expected returns on pension plan assets and higher expenses from the compounding of our pension obligations.



Profit before income taxes in 2008 amounted to €2.8 billion compared to €9.2 billion in
2007.



Income tax expense was €1.1 billion in 2008 compared to €4.3 billion in 2007. We computed
income tax expense in 2008 based on pre-tax income of €2.8 billion and in 2007 based on pre-tax income of €9.2 billion. The
effective tax rate was 39% in 2008 and 47.1% in 2007. In general, the effective tax rate reflects the composition of our earnings.

The
effective tax rate in 2008 was approximately 9% higher than the expected tax rate. This is partially the result of impairments recognized on deferred tax assets at
non-German subsidiaries. In addition, pretax income in 2008 includes losses related to our investments in Chrysler, not all of which were tax deductible. In the prior year,

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the
high effective tax rate (47.1%) and high income tax expense reflect a €2.2 billion impairment of deferred tax assets mostly held by Chrysler entities in prior years which
have been allocated to the Daimler Group following the transfer of a majority interest in the Chrysler activities. We recognized an impairment of these deferred tax assets when we determined that the
parameters for realizing future tax
benefits associated with those tax assets had changed as a result of the transfer of the Chrysler activities. For further information on income taxes, please refer to Note 8 to our Consolidated
Financial Statements.



Net profit from continuing operations amounted to €1.7 billion (2007: €4.9 billion). The
decrease is primarily a reflection of lower EBIT of €2.7 billion (2007: €8.7 billion) and lower income tax expense.



In 2008, we recorded a net loss of €0.3 billion from discontinued operations (2007: loss of
€0.9 billion). The loss in 2008 is primarily related to the reimbursement of costs to our Chinese joint venture, Beijing Benz-DaimlerChrysler Automotive, which were
incurred as a result of the transfer of a majority interest in the Chrysler activities in 2007. For further information, please see Note 2 to our Consolidated Financial Statements. The prior
year loss of €0.9 billion includes the operating result, net interest result and income taxes of the Chrysler activities until August 3, 2007, as well as the loss from
the deconsolidation of the Chrysler activities (€0.8 billion).



Net profit in 2008 was €1.4 billion compared to €4.0 billion in 2007. These amounts
include net profit attributable to the shareholders of Daimler AG (excluding minority interests) of €1.3 billion in 2008 and €4.0 billion in 2007,
respectively. Basic and diluted earnings per share in 2008, for profit attributable to shareholders of Daimler AG, amounted to €1.41 and €1.40, respectively, compared
to basic and diluted earnings per share of €3.83 and €3.80, respectively, in 2007.



In 2008, we recorded EBIT of €2.7 billion, a decrease of 69% compared to 2007
(€8.7 billion).

The
decrease in Group EBIT was mainly the result of losses and impairment charges totalling €3.2 billion related to our investments in Chrysler and weaker
operating results of Mercedes-Benz Cars and, to a lesser extent, Daimler Trucks. The decrease in EBIT was also partially due to the fact that 2007 EBIT included significantly higher gains
in connection with the transfer of portions of our equity interest in EADS (2008: €0.1 billion; 2007: €1.6 billion). Daimler Financial Services, the
Mercedes-Benz Vans segment and the Daimler Buses segment all achieved higher operating results than in the prior year.

The
table above shows the business segment contributions to Group EBIT and the reconciliation from segment EBIT to Group EBIT.



Reconciliation from total segment EBIT to Group EBIT in 2008 included our proportionate share in EADS's net results which had a
positive effect on 2008 Group EBIT of €0.2 billion (2007: €13 million). The year-to-year increase in EADS's results was primarily
due to the fact that EADS's 2007 results were burdened with higher expenses in connection with the Power8 restructuring program and delivery delays for the Airbus A400M. The reconciliation to 2008
Group EBIT also included a gain of €0.1 billion from the sale of EADS shares, while the reconciliation to 2007 Group EBIT included a gain of €1.6 billion
related to the transfer of portions of our equity interest in EADS. Our 19.9% share in Chrysler's net loss reduced Group EBIT by €1.4 billion in 2008. In 2007, our proportionate
share in the results of Chrysler Holding LLC was a loss of €0.4 billion. In 2008, we also recorded

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charges
of €1.8 billion as a result of the impairment of loans and other assets relating to Chrysler. For additional information regarding our investment in Chrysler, please
refer to Note 2 to our Consolidated Financial Statements. The reconciliation to 2008 Group EBIT further included a gain of €0.4 billion from the sale of the Group's real
estate properties at Potsdamer Platz.

In
addition, the reconciliation from total segment EBIT to 2008 Group EBIT includes corporate expenses of €0.4 billion, compared to
€0.9 billion in the prior year, and eliminations of transactions within the Group (2008: income of €10 million; 2007: income of
€35 million). Corporate expenses in both years mainly related to expenses arising from workforce reductions in the Group's administrative functions (New Management Model) and
expenses incurred in connection with legal proceedings that were not attributable to the segments.

Segment Discussions



Revenue of the Mercedes-Benz Cars segment decreased 9% from €52.4 billion in 2007 to
€47.8 billion in 2008, while total unit sales went down 2% from 1,293,184 units to 1,273,013 units in 2008. The decrease in revenue primarily reflects weaker unit sales in all
classes except the C-Class and the smart which, after the overall drop-off in demand that began in the third quarter of 2008, could no longer compensate for the sales declines
in the other classes. The disproportionate development of revenue and unit sales was in part the result of a shift towards smaller vehicles in most markets. Currency effects and, to a lesser degree,
increased price competition also contributed to the decline in revenue. Unit sales of the E-Class declined 25%, in part because this model is approaching the end of its life cycle. Sales
of the S-Class (including Maybach) were 13% lower than the 2007 level, sales of the ML-/R-/G-/GL-/GLK- Classes declined 10% in
2008 compared to 2007, and sales of the A-/B- Classes went down 9%. Strong sales performance of the C-Class sedan and station wagon launched in 2007 resulted in a
16% increase in C-Class unit sales. Unit sales of smart at 138,957 were 35% higher in 2008 than in 2007 (103,068), in part due to the introduction of the new smart fortwo in the U.S.
market.

In
Germany, 2008 revenue of Mercedes-Benz Cars was 9% lower than in 2007, while unit sales declined 3%. With revenue of €12.3 billion, Germany
continues to be the most important market for this segment, representing 26% of the segment's worldwide revenue and unit sales. In the other Western European countries, revenue of
Mercedes-Benz Cars decreased 13% from €15.5 billion in 2007 to €13.4 billion in 2008. Overall unit sales in these countries were down 8%.

In
the United States, unit sales in 2008 were virtually the same as in 2007, however, revenue declined 19% from €10.6 billion in 2007 to
€8.6 billion in 2008. Revenue in Japan fell 28% to €1.3 billion in 2008, mainly due to lower unit sales, while revenue in Asia (excluding
Japan) went up 33% compared to the previous year, reaching €6.3 billion. The revenue increase in Asia (excluding Japan) developed largely in line with unit sales, which were 39%
higher in 2008 than in 2007.

In
2008, Mercedes-Benz Cars recorded EBIT of €2.1 billion, compared to EBIT of €4.8 billion in 2007. The segment's return on
sales (calculated as EBIT divided by revenue) was 4.4% (2007: 9.1%). Earnings in the first six months of 2008 showed a positive development, also reflecting higher unit sales in emerging markets. The
overall drop off in demand in the NAFTA region and major European markets beginning in the third quarter of 2008 had a significant negative effect on EBIT. The significant weakening of the world
economy in the second half of 2008 also forced us to reassess the residual values of leased vehicles which resulted in impairment charges of €465 million. In the second half of
the year, we also experienced increased price competition and a less favorable model mix. Additional factors that burdened the year-to-year development of EBIT were currency
effects and increased raw material prices. These negative effects were only partially offset by further efficiency improvements. For a description of the risk sharing arrangement between Daimler
Financial Services and our vehicle segments, please refer to "Critical Accounting Policies  Recovery of Carrying Amount of Equipment on Operating Leases."

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An
amendment of a defined benefit plan resulted in past service income (before income taxes) of €84 million in 2008.



Revenue of our Daimler Trucks segment in 2008 was virtually unchanged at €28.6 billion (2007:
€28.5 billion). Unit sales developed in line with revenue, showing a slight increase of 1% from 467,667 units in 2007 to 472,074 units in 2008. Higher unit sales in Brazil, the
Middle East and Indonesia largely compensated for lower unit sales in the NAFTA region (mainly the United States and Canada) and Japan.

In
the NAFTA region, Daimler Trucks revenue went down 12% from €7.6 billion in 2007 to €6.7 billion in 2008. Total unit sales in that region
declined 15% from 114,049 units to 97,313 units. This development mainly reflects a general decline in demand in the United States due to deteriorating market conditions. Unit sales in the United
States represent 17% of our total 2008 truck sales. The disproportionate development of revenue and unit sales in the NAFTA region was primarily the result of a favorable shift in model mix.

In
Germany, revenue of Daimler Trucks increased 1% from €5.6 billion to €5.7 billion. Unit sales went up at the same rate from 41,006 units
in 2007 to 41,597 units in 2008. Revenue in Western Europe (excluding Germany) decreased 3% from €4.1 billion in 2007 to €4.0 billion in 2008. Unit sales
in that region were also down 3%, from 46,659 units in 2007 to 45,145 units in 2008. Unit sales in Germany represented 9%, and the remaining Western European market 10%, of our total 2008 Daimler
Trucks vehicle sales.

Sales
in Asia (including Australia and the Middle East) increased 8% from 153,162 units in 2007 to 164,765 vehicles in 2008, while revenue was up 14% at
€6.1 billion in 2008 (2007: €5.4 billion). Higher unit sales in Indonesia and, to a lesser extent, the Middle East more than offset a significant decrease
in unit sales in Japan. Revenue in Asia increased at a higher rate than unit sales, mainly due to currency translation effects. Unit sales in Asia represented 35% of total 2008 Daimler Trucks sales.

Unit
sales in Japan, which consisted primarily of sales by MFTBC, declined 22% from 53,992 units in 2007 to 42,035 units in 2008, while revenue decreased 3% from
€3.2 billion to €3.1 billion. The declines in unit sales and revenue generally reflect the weakening economy in Japan. The appreciation of the Japanese
yen against the euro primarily contributed to the disproportionate development of unit sales and revenue.

In
Latin America, sales increased 11% from 53,017 units in 2007 to 58,951 units in 2008. Revenue in that region increased 25% to €3.0 billion in 2008. The increase
in unit sales and revenue resulted from strong demand, particularly in Brazil. Rising inflation and the resulting price increases in Brazil were primarily responsible for the disproportionate increase
in revenue.

In
2008, our Daimler Trucks segment achieved EBIT of €1.6 billion (2007: €2.1 billion). The segment's return on sales was 5.6%, compared
with 7.5% in the prior year. The decline in EBIT was mainly the result of lower unit sales in the NAFTA region and, to a smaller degree, Japan due to the ongoing difficult economic situation in those
markets. In addition, higher raw material prices and currency effects negatively affected EBIT in 2008. The measures initiated in 2008 to optimize and strengthen the business operations of Daimler
Trucks North America resulted in expenses of €0.2 billion. We expect to incur further expenses in connection with these measures in 2009 and 2010. Higher truck sales in Brazil
and Asia, improved product positioning and efficiency improvements positively affected EBIT.

EBIT
in 2007 included a gain on the sale of real estate properties in Japan (€0.1 billion) and adjustments to pension and healthcare plans
(€0.1 billion).



Revenue of our Mercedes-Benz Vans segment increased from €9.3 billion in 2007 to
€9.5 billion in 2008, a 1% increase. Revenue in each of 2008 and 2007 includes €0.9 billion from the production of a van for Volkswagen.

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Worldwide
unit sales of Mercedes-Benz Vans decreased 1% from 289,073 units in 2007 to 287,198 units in 2008. The sales of the vans produced for Volkswagen are not included in
the unit sales of Mercedes-Benz Vans.

In
Germany, revenue of Mercedes-Benz Vans increased 5% from €3.5 billion in 2007 to €3.6 billion in 2008. Unit sales went up 1%
from 73,262 units in 2007 to 74,036 units in 2008. Revenue in Western Europe (excluding Germany) decreased 2% from €3.8 billion in 2007 to €3.7 billion in
2008. Unit sales in that region at 133,101 units were close to the prior year volume (2007: 132.550 units). Revenue achieved in Germany and in the remaining Western European markets represent 38%, and
39%, respectively, of the segment's total 2008 revenue.

In
the NAFTA region revenue decreased by 17% from €0.6 billion in 2007 to €0.5 billion in 2008. Unit sales also decreased by 25% from 28,476
units in 2007 to 21,487 units in 2008. The decrease in revenue was partially offset by price increases which we implemented to compensate for an unfavorable exchange rate development.

Our
Mercedes-Benz Vans segment was able to improve its operating results as a result of strong revenue over the year as a whole, although market conditions deteriorated
towards the end of the year. In 2008, Mercedes-Benz Vans had an EBIT improvement of 43% (2008: EBIT of €0.8 billion; 2007: EBIT of
€0.6 billion) and returns on sales of 8.6% and 6.1%, respectively.



Daimler Buses recorded an 11% improvement in revenue from €4.4 billion in 2007 to
€4.8 billion in 2008.

Worldwide
unit sales went up 4% from 39,049 units in 2007 to 40,591 units in 2008. The disproportionate development of revenue and unit sales was primarily the result of increased sales
of high-end buses and coaches in Western Europe.

Revenue
in Western Europe increased 7% from €2.1 billion in 2007 to €2.3 billion in 2008, while unit sales in that region increased 12% to
7,766 buses and coaches in 2008 compared to 6,953 units in 2007, mainly as a result of a higher share of complete buses. Revenue in Western Europe represented 48% of worldwide 2008 revenue achieved by
the Daimler Buses segment. Revenue in Germany, our home market, increased 12% to €1 billion and unit sales went up 11% to 3,099 units compared to 2,793 in 2007.

In
Latin America (excluding Mexico), revenue increased 5% to €0.9 billion in 2008. Sales of bus chassis in that region, however, decreased by 3% from 20,072 units
in 2007 to 19,467 units in 2008.

In
the NAFTA region, revenue showed different developments. Revenue from the sale of Orion buses and Setra coaches in North America increased from €0.3 billion in
2007 to €0.4 billion in 2008, an increase of 14%. This increase was mainly the result of higher sales of Orion buses. In Mexico, revenue increased 20% due to higher unit sales
(6,057 units in 2008 compared to 5,317 units in 2007).

Our
Daimler Buses segment was able to improve its operating results from EBIT of €0.3 billion in 2007 to €0.4 billion in 2008. Returns on
sales were 8.4% in 2008 and 7.1% in 2007, respectively.



Revenue of our Daimler Financial Services segment increased from €11.0 billion in 2007 to
€12.0 billion in 2008, a 9% improvement. This increase was primarily the result of a larger portfolio of leasing and finance contracts in 2008, partially offset by currency
translation effects.

Activities
of our Daimler Financial Services segment in the NAFTA region (including Capital Services USA) contributed €5.7 billion, or 48%, of total segment
revenue in 2008, which is in line with last year's level of 48%. Revenue generated in Germany was €2.7 billion, or 22%, of total revenue compared to
€2.5 billion, or 23%, of total revenue in 2007. Revenue derived from financial services activities in Western Europe (excluding Germany) amounted to
€2.3 billion, or 19%, of total revenue compared to €2.3 billion, or 21%, in 2007.

In
2008, the Daimler Financial Services segment originated new leasing and finance contracts with a total value of €29.5 billion compared to
€27.6 billion in 2007, a 7% increase. At December 31, 2008, our Daimler

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Financial
Services segment managed a portfolio of leasing and finance contracts of €63.4 billion, a 7% increase over the comparable portfolio of
€59.1 billion managed at December 31, 2007. Excluding currency translation effects, the portfolio value in 2008 was 9% higher than in the prior year.

EBIT
of Daimler Financial Services was €0.7 billion, compared to €0.6 billion in 2007. The increase in EBIT was primarily the result of the
larger portfolio of leasing and finance contracts, partially offset by a significant increase in cost of risk (mainly credit risk), especially in the last quarter of 2008.

LIQUIDITY AND CAPITAL RESOURCES

Due to the financial crisis which continued into 2009, we increased our liquidity in 2009 and maintained it at a conservative high
level. We continued to have adequate access to capital markets and credit from financial institutions in 2009. We faced somewhat higher borrowing costs when we accessed the capital markets in the
early part of the year, but our borrowing costs decreased again over the course of the year. In case of a renewed negative trend in the financial markets, we could be faced with a renewed increase in
borrowing costs and lower funding flexibility. In particular, this could negatively affect the competitiveness and profitability of our financial services business or even result in a limitation of
the financial services we offer, thereby negatively affecting our vehicle sales.

We
expect the funds available from operations, external borrowings, and securitization transactions and other sources to 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.

In
2009, our main sources of cash were operations, the capital markets and external borrowings from financial institutions. We also used increased cash deposits at the
Mercedes-Benz Bank and, to a lesser degree, the sale of finance receivables in securitization transactions as further funding sources. For further information on the sale of finance
receivables, please refer to the discussion below under the heading "Analysis of Cash Flow Statement" and to Note 23 to our Consolidated Financial Statements.

We
used the funds raised in 2009 primarily to finance our lease and sales financing business and to meet the capital expenditure requirements of our industrial businesses. We typically
finance our lease and sales financing activities with a high proportion of debt.

In
the ordinary course of our business we issue bonds and commercial paper, execute securitization transactions or borrow money from financial institutions in various currencies to cover
our funding needs. The high borrowing costs we faced at the beginning of 2009 as a result of the tight credit markets decreased over the course of the year as the markets improved.

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.

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

December 31,2009

2008

2007(€ in billions)Cash and cash equivalents with an original maturity of three months or less


9.8


6.9


15.6Securities and other liquid assets


6.3


1.1


1.5Liquidity


16.1


8.0


17.1


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In light of the financial crisis we increased our liquidity in 2009 and maintained it at a conservative high level. For a description of the factors contributing to this increase, please
refer to the discussion of the year-to-year development of our cash flows presented below. Total liquidity in 2007 was significantly higher due to payments received in the
context of the transfer of a majority interest in the Chrysler activities.

We
hold our liquidity primarily in euros and U.S. dollars. As of December 31, 2009, euro denominated liquid assets represented 69% and U.S. dollar denominated liquid assets
represented 19% of total liquid financial assets. Liquid financial assets as a whole were 12.5% of total assets compared to 6.1% at the end of 2008.

As
a result of the global operations of our lease and sales financing business and our automotive businesses, 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 manage these risks primarily by matching the terms and source
of the funding with our funding needs where appropriate and to a lesser degree by hedging through 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" and to Note 30 to our Consolidated Financial Statements.

Analysis of Cash Flow Statement

In May 2008, the IASB published Improvements to IFRS which included an amendment to IAS 16 "Property, Plant and Equipment."
Pursuant to this amendment, proceeds from the sale of assets held for rental that occur in the ordinary course of activities must be recognized as revenue. Cash flows resulting from these sales must
be shown under cash flows from operating activities in accordance with an amendment to IAS 7 "Statement of Cash Flows." As a result of these changes, cash flows from vehicles on operating
leases of our Daimler Financial Services business are now presented in the cash flow statement in "Cash provided by (used for) operating activities" together with the cash flows from vehicles on
operating leases of our industrial business. To the same extent "Cash provided by (used for) investing activities" changed in the opposite direction due to this reclassification. In connection with
the mandatory reclassification, we also decided to reclassify changes in receivables from financial services from "Cash provided by (used for) investing activities" to "Cash provided by (used for)
operating activities." With this additional reclassification we harmonized the presentation of the entire sales financing and leasing business in our consolidated statements of cash flows within "Cash
provided by (used for) operating activities."

We
have applied these mandatory and voluntary reclassifications as of January 1, 2009 and have adjusted 2008 and 2007 cash flow figures and the related discussions below to
reflect these changes.

December 31,2009

2008

2007(€ in billions)Net cash provided by operating activities


10,961


(786
)

7,146thereof from discontinued operations








1,593Net cash provided by (used for) investing activities


(8,950
)

(4,812
)

26,479thereof from discontinued operations








(1,404
)Net cash provided by (used for) financing activities


1,057


(2,915
)

(25,204
)thereof from discontinued operations








(2,655
)




Our
cash flow statement includes the Chrysler activities only from January 1, 2007 through August 3, 2007. Accordingly, the discussion below comparing cash flow in 2008 and
2007 reflects cash flow effects arising from the Chrysler automotive activities and the related Chrysler financial services business in the NAFTA region only for that period.

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Cash provided by operating activitiesin 2009 was
€11.0 billion, €11.8 billion above the 2008 level of €(0.8) billion. The following factors primarily contributed to this
increase:



The
positive factors described above were partially offset by:



Cash used for investing activitieswas €9.0 billion in 2009 compared to €4.8 billion in
2008. This change is mostly due to net cash outflows from the acquisition and sale of securities of €5.4 billion in 2009 compared to a net cash inflow of
€0.2 billion in 2008. This increase of net cash outflows was partially offset by lower expenditures for intangible assets and property, plant and equipment.

The
2008 figures also reflect cash outflows for the acquisition of shares in Tognum (€0.7 billion) and Kamaz (€0.2 billion), including
amounts related to separately identifiable intangible assets, and from the drawdown by a subsidiary of Chrysler Holding LLC of US$1.5 billion (€1.0 billion) of
second lien loans committed by Daimler in 2007 in connection with the transfer of a majority interest in the Chrysler activities. These outflows were largely offset by the proceeds from the sale of
real-estate properties at Potsdamer Platz and from the transfer of EADS shares, which were €1.3 billion and €0.4 billion, respectively.

Cash provided by financing activitieswas €1.1 billion in 2009, compared to cash used for financing activities of
€2.9 billion in 2008. This development was primarily due to the capital contribution of €1.95 billion from Aabar Investments PJSC in March 2009 and cash
outflows in 2008 in connection with our share buy-back programs (€4.2 billion). In addition, dividend payments decreased from €2.0 billion in 2008 to
€0.7 billion in 2009. These factors were partially offset by a net cash outflow in 2009 from the net repayment of borrowings (€0.2 billion). Repayments of
borrowings more than offset an increase in customer deposits at
the Mercedes-Benz Bank (€6.6 billion). In 2008, we had a net cash inflow from borrowings of €3.2 billion.

Cash and cash equivalentswith an original maturity of three months or less increased by €2.9 billion from
€6.9 billion in 2008 to €9.8 billion in 2009.

Total liquidity, which includes cash and cash equivalents and long-term investments and securities, increased from
€8.0 billion in 2008 to €16.1 billion in 2009. This development is in line with our intent to maintain a conservative high level of liquidity.

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Cash used by operating activitiesin 2008 was €(0.8) billion,
€7.9 billion below the 2007 level of €7.1 billion. The following factors primarily contributed to this decrease:



The
negative factors described above were partially offset by:



Cash
provided by operating activities in 2007 included €1.6 billion attributable to discontinued operations, primarily the Chrysler Financial Services business
through August 3, 2007.

Cash used for investing activitieswas €4.8 billion in 2008 compared to cash provided by investing activities of
€26.5 billion in 2007. This change is mostly due to:



The
factors described above were partially offset by:



Cash
provided by investing activities in 2007 included a cash outflow of €1.4 billion attributable to discontinued operations.

Cash used for financing activitieswas €2.9 billion in 2008, compared to cash used for financing activities of
€25.2 billion in 2007. This development was due to increased borrowings as a result of lower cash provided by operating activities and less cash provided by investing
activities. These factors were partially offset by increased

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cash
outflows in connection with our share buy-back programs (2008: €4.2 billion; 2007: €3.5 billion) and the fact that 2007 included cash inflows in
connection with the exercise of stock options (€1.6 billion).

Cash
used for financing activities in the year 2007 included €2.7 billion of cash used for financing activities attributable to discontinued operations.

Cash and cash equivalentswith an original maturity of three months or less decreased by €8.7 billion from
€15.6 billion in 2007 compared to €6.9 billion in 2008.

Total liquidity, which includes cash and cash equivalents and long-term investments and securities, decreased from
€17.1 billion in 2007 to €8.0 billion in 2008. Total liquidity in 2007 was significantly higher due to payments received in the context of the transfer of
a majority interest in the Chrysler activities.

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 and commercial paper or, depending on market availability, 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.



The following table presents the carrying values of our primary financing instruments, which are notes and bonds, commercial paper,
borrowings from financial institutions, and deposits from our direct banking business which we conduct through the Mercedes-Benz Bank in Germany, as of December 31, 2009 and 2008:

December 31,2009

2008(€ in billions)Notes and bonds


30.1


34.1Commercial paper


0.2


2.3Liabilities to financial institutions


13.0


14.6Deposits from direct banking business


12.6


6.0




As
of December 31, 2009, the breakdown by currency of the financing liabilities presented in the table above was as follows: 45% in euros, 30% in U.S. dollars, 4% in Japanese yen,
3% in Canadian dollars and 3% in British pounds. In most cases, our subsidiaries borrow money in their functional currency. As of December 31, 2009, the aggregate borrowing rate of the
financing liabilities presented in the table above was 4.42%, and approximately 68% of these financing liabilities were at fixed rates.

In
both 2009 and 2008, we sold receivables in asset-backed security (ABS) transactions, which under IFRS are accounted for as secured borrowings. As of December 31, 2009 and
December 31, 2008, these transactions resulted in financing liabilities of €1.3 billion and €0.7 billion, respectively. These liabilities are not
included in the above table.

Our
total financing liabilities, which include liabilities from ABS transactions and finance lease transactions, amounted to €58.3 billion at December 31,
2009 compared to €58.6 billion at December 31, 2008. Of our total financing liabilities at December 31, 2009, €25.0 billion
were due within one year. Our total financing liabilities represented 45% of total equity and liabilities in 2009 and 44% in 2008.

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We
typically finance our lease and sales financing activities with a high proportion of debt. As of December 31, 2009, the total carrying amount of equipment on operating leases
and receivables from our financial services business amounted to €57.0 billion, compared to €61.1 billion at the end of 2008.

In
the Euro-Market we have a €35 billion Euro-Medium Term Note Program, permitting Daimler AG and several of its subsidiaries to issue
notes and bonds. Of this program, €12.4 billion remained unused as of February 15, 2010.

In
Japan, Daimler AG has a JPY500 billion debt securities Shelf Registration Statement on file with the Ministry of Finance, of which JPY456.5 billion remained unused as of
February 15, 2010.

In
South Africa we have a ZAR18 billion Medium Term Note Program, permitting Mercedes-Benz South Africa (Proprietary) Limited to issue notes. Of this program,
ZAR9.8 billion remained unused as of February 15, 2010.

In
Mexico we have a MXN6 billion Short and Long-Term Revolving Bonds Program, permitting Daimler México, S.A. de C.V. to issue notes and
commercial paper. Of this program, MXN3.6 billion remained unused as of February 15, 2010.

The
weighted average interest rate payable under notes and bonds we held as of December 31, 2009, was 4.66%. The weighted average interest rate payable under the deposits from the
direct banking business as of December 31, 2009, was 3.24%.



We have a €10 billion multi-currency commercial paper program in the Euro-Market of which
€10 billion was unused as of February 15, 2010. In addition, we have US$3 billion and AUS$1 billion commercial paper programs of which US$3 billion
and AUS$1 billion, respectively, remained unused as of February 15, 2010.

The
weighted average interest rate payable under commercial paper we had outstanding as of December 31, 2009 was 6.48%.



At December 31, 2009 and December 31, 2008, we had short- and long-term credit lines available of
€21.1 billion and €22.7 billion, respectively, of which €8.0 billion and €8.5 billion, respectively, were
unused as of such dates. The weighted average interest rate payable under the lines of credit available to us as of December 31, 2009 was 5.04%. These credit lines include a syndicated
US$4.9 billion credit facility of Daimler AG. This facility will mature in December 2011. In October 2009, the Group successfully replaced a maturing €3 billion
364-day facility with a €3 billion 2-year-credit-facility with a syndicate of international banks. These facilities serve as a
back-up for commercial paper drawings and provide funds for general corporate purposes. At the end of 2009, both facilities remained unused.

Included
in the borrowings from financial institutions are loans of approximately €0.1 billion from the European Investment Bank (EIB) which contain a rating
trigger. If any two of the rating agencies Standard & Poor's Rating Services, Moody's Investor Service and Fitch Ratings 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, or all rating agencies cease to publish any rating in respect
of our long-term senior unsecured debt, then EIB has the right to demand collateralization of its loans 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."

For
additional information regarding our liquidity, please refer to the discussion under the subheading "Liquidity Risk" in Note 30 to our Consolidated Financial Statements.

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Standard & Poor's Ratings Services (S&P), Moody's Investors Service, Inc. (Moody's), Fitch Ratings Ltd. (Fitch)
and DBRS 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

DBRSShort-term debt


A-2


P-2


F2

R-1(low)Long-term debt


BBB+


A3


BBB+

A (low)




Debt
ratings are assessments by the rating agencies of the credit risk associated with us 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.On February 27, 2009, S&P revised its outlook on Daimler AG to negative from stable in light of the rapid
weakening of most
global automotive and commercial vehicle markets. On June 18, 2009, our long-term corporate credit rating was lowered to BBB+ from A- with a negative outlook. The
downgrade reflected a negative revision of S&P's financial forecast for Daimler, in light of the
weak conditions and prospects in the global automotive and truck markets, and weak reported company performance. The A-2 short-term rating was affirmed.

Moody's ratings.On February 18, 2009, Moody's affirmed Daimler's A3 long-term and Prime-2 short-term
ratings and changed the outlook on the ratings to negative from stable. The negative outlook reflected the more severe decline of Daimler's key markets than Moody's had previously anticipated, both in
terms of magnitude and pace, which, according to Moody's, also resulted in a significant deterioration of the company's profitability and cash generation.

Fitch ratings.On January 29, 2009, Fitch downgraded Daimler AG's long-term issuer default rating to BBB+ from A- with
a stable outlook. The short-term rating was affirmed at F2. Fitch revised its forecasts for Daimler in 2009 and 2010, expecting the company to exhibit much weaker profitability and cash
generation than previously anticipated by Fitch. According to Fitch, the stable outlook reflects the reasonable headroom within a BBB+ rating. On March 25, 2009, Fitch affirmed Daimler's rating
following a review of its publicly rated European car manufacturers; however, the outlook was revised to negative from stable. The rating action reflected Fitch's revised forecasts for European car
manufacturers and expectations for industry growth over the next two years.

DBRS ratings.DBRS confirmed the long-term and short-term ratings of Daimler AG and its related companies at A (low) and
R-1 (low), respectively, on November 10, 2009. According to DBRS, the confirmation reflected Daimler's strong business profile based on its leading positions in premium automotive
vehicles and trucks. The trend on the ratings remained stable.



We may issue ordinary shares or bonds convertible into ordinary shares in the future as another potential source of funding. For
further information about the ability of our board of management, with the approval of our supervisory board, to issue new ordinary shares for cash and to issue convertible bonds and/or notes with
attached warrants, please refer to Note 19 to our Consolidated Financial Statements.

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Contractual obligations and commercial commitments

The table below presents our on- and off-balance sheet contractual obligations as of December 31, 2009:

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

43,559


11,238


21,653


8,089


2,579Finance Lease Obligations

588


61


90


70


367Operating Leases

2,372


304


524


427


1,117Purchase and Investment Obligations

10,084


9,640


428


15


1Other Long-Term Obligations

1,884


96


1,342


244


202Total Contractual Obligations

58,487


21,339


24,037


8,845


4,266




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 financing liabilities with original maturities of more than one year. "Finance Lease Obligations" encompass the total minimum future lease payments for finance 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 other contractual
cash obligations that are not included in one of the other categories and does not include accrued liabilities. Therefore, the line "Other Long-Term Obligations" does not include our
provisions for income taxes and our provisions for other risks.

The
contractual cash obligations also do not reflect our pension benefit and other post-employment benefit obligations. For estimated future pension benefit payments, please
refer to Note 21 to our Consolidated Financial Statements. Also not reflected in the above table are irrevocable loan commitments primarily provided to customers and dealers by our Daimler
Financial Services segment. At December 31, 2009, irrevocable loan commitments amounted to €1.6 billion (2008: €1.5 billion).

Pension Benefit Obligations and Cost

The obligations and expenses recognized in our Consolidated Financial Statements for our employee pension benefit plans are not
necessarily indicative of our future 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 defined pension benefit obligations and cost. We subsequently recognize the accumulated differences (the actuarial gains and losses) in our consolidated statements of income
(loss) through amortization over future periods when certain conditions are met. Please refer to the discussion above under the heading "Critical Accounting Policies  Pension
Benefits" and to Note 21 to our Consolidated Financial Statements for further information regarding our pension benefit obligations, including the significant assumptions used.



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

The
funded status of our defined pension benefit obligations expresses the extent to which plan assets are available to satisfy our obligations. At December 31, 2009, our pension
plans had an underfunded status of €5.9 billion compared to an underfunded status of €4.9 billion at December 31, 2008. The increase of the

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underfunded
status of our pension benefit plans in 2009 is mainly attributable to the decrease of the discount rates assumed for all German plans in 2009. The fair value of our plan assets at
December 31, 2009, was slightly above the prior year level.



We do not expect to increase cash contributions to our pension plans substantially in the near term. For 2010, we intend to contribute
€0.3 billion in cash to our pension plans.

OFF-BALANCE SHEET ARRANGEMENTS

We utilize certain off-balance sheet arrangements in the course of our business. Our off-balance sheet
arrangements are contractual arrangements with unconsolidated parties under which we have or may have obligations arising from guarantees or irrevocable loan commitments.

Contingent obligations under guarantees

Obligations arising from guarantees primarily pertain to:



Financial guarantees principally represent guarantees that require us to make certain payments if a party other than a consolidated
subsidiary fails to meet its financial obligations. As of December 31, 2009, our maximum potential obligation resulting from financial guarantees was €1.5 billion (2008:
€1.9 billion).

In
2007, in connection with our transfer of a majority interest in the Chrysler activities, we agreed with the Pension Benefit Guaranty Corporation to guarantee amounts payable to
Chrysler pension plans up to an aggregate amount of US$1 billion (€0.7 billion at an exchange rate of €1=1.3919, the noon buying rate on
December 31, 2008) if such plans terminate prior to the fifth anniversary of the Chrysler transaction. Based on contractual arrangements entered into in June 2009, we paid US$200 million
into Chrysler's pension plans and will make further payments of US$200 million in each of
the next two years. The 2007 pension guarantee of US$1 billion vis-à-vis the PBGC has been replaced by a new guarantee in an amount of
US$200 million that will remain in place until August 2012. In addition, certain previously outstanding guarantees which the Group provided for the benefit of Chrysler continue to be
outstanding. At December 31, 2009, the aggregate amount of those guarantees was €0.3 billion. To secure the liabilities underlying these guarantees, Chrysler has paid
funds into an escrow account which may be used to satisfy the guaranteed obligations. At December 31, 2009, the balance remaining in the escrow account was €0.2 billion.

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 financial
guarantees, which are subject to specific triggering events:



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The
risks and obligations of Cofiroute, which holds a 10% interest in Toll Collect GmbH, are limited to €70 million. Daimler Financial Services AG and
Deutsche Telekom AG are jointly and severally obligated to indemnify Cofiroute for amounts exceeding this limitation.

While
our maximum potential future obligation resulting from the guarantee of the bank loan can be determined (€115 million), we cannot reasonably estimate the
amount or range of amounts of possible loss resulting from the guarantee in form of the equity maintenance undertaking with respect to Toll
Collect due to the uncertainties described above, although this amount could be material. Therefore, only our maximum potential future obligation resulting from the guarantee of the bank loan is
included in the 2009 €1.5 billion maximum potential obligation resulting from financial guarantees.

For
additional information regarding our involvement with Toll Collect and the contingent liabilities resulting from the involvement, please refer to Notes 27 and 28 to our
Consolidated Financial Statements.

We
also provide a number of other guarantees with smaller guaranteed amounts. These include guarantees in favor of third parties, to cover the obligations of certain of our customers or
independent dealers, in the event that these customer or independent dealers fail to meet their financial obligations towards the third parties. We provide these guarantees mainly in connection with
the sale of our products. In addition, we sometimes provide financial guarantees in connection with specific obligations of suppliers and other parties that provide products or services or lease
property, plant and equipment to us.



We sometimes issue guarantees to customers to support the sale of our vehicles. These guarantees have different terms and durations. In
an effort to encourage repeat purchases by our customers, we sometimes agree to repurchase used vehicles from them at predetermined values, provided the customers purchase new vehicles from us. Our
trade-in commitment is subject to various conditions, including limitations on mileage and age of the vehicle.

As
of December 31, 2009, provisions established in connection with these guarantees amounted to €0.1 billion and our maximum potential obligation was
€0.7 billion, the same amounts as in 2008. Residual value guarantees related to arrangements for which revenue recognition is precluded are reflected on our balance sheet and
are not discussed under this caption.



We
have also granted a number of other guarantees. We do not expect these other guarantees to have a material effect, individually or in the aggregate, on our consolidated financial
condition or results of operations.

For
additional information on our other guarantees and on our guarantees generally, please refer to Note 28 (Guarantees and Other Financial Commitments) to our Consolidated
Financial Statements.

Irrevocable loan commitments

We also have irrevocable loan commitments, which are primarily provided to customers and dealers by our Daimler Financial Services
segment. At December 31, 2009, irrevocable loan commitments amounted to €1.6 billion (2008: €1.5 billion).

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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 technologies and to further shorten lead times in research and development. Innovation is an important element of our overall corporate strategy, and our corporate research and advanced
engineering function plays a significant role in meeting this strategic goal together with our operating businesses. In particular, key challenges 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 these challenges:
first, further improvement of our vehicles with conventional combustion engine technology; second, realization of an efficiency gain through hybridization; and third, commercial development of fuel
cell propulsion and electric drive vehicles. It is a cornerstone of our corporate strategy to have a leading position in the area of alternative propulsion technologies.

In
addition to the corporate function for research and advanced engineering, we have development functions in each of our automotive businesses that are responsible for developing
production-ready vehicles.

Our
corporate function for research and advanced engineering



This
function is closely integrated with the development function of Mercedes-Benz Cars.

On
the corporate level, we conduct our research and advanced engineering work in twelve strategic fields which are assigned to three primary technical areas:



Most
of the facilities of our centralized research and advanced engineering function are located in Germany, but we also maintain research centers in North America and Asia. These
include a research and technology center in Palo Alto, California, a research center for information and communication technology in Bangalore, India, and an R&D facility with focus on hybrid
powertrain systems in Redford, Michigan. In addition, we participate in the international exchange of new ideas and concepts through collaborations and joint ventures with world renowned research
institutes and through exchange programs for scientists and employees.

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The
table below shows our research and development expenditures during each of the last three years:

Year Ended December 31,2009

2008

2007(€ in millions)Research and development expenditures


4,181


4,442


4,148thereof: Capitalized development costs


1,285


1,387


990




In
2009, research and non-capitalized development costs represented 3.7% of our total revenue. Research and development expenditures for the year 2007 do not include the
amount spent by the former Chrysler Group since we present all income and expense items of the Chrysler activities for the year 2007 as discontinued operations.

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
supervisory board supervises and advises our board of management and appoints and removes its members. Although it may not make management decisions, our supervisory board has
determined categories of transactions which require its approval. The board of management, which acts under the principle of collective responsibility, manages our business. It is authorized to
represent Daimler AG and to enter into binding agreements with third parties on its behalf.

Each
of our supervisory board and our management board has adopted rules of procedure providing for additional rules relating to its governance.

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SUPERVISORY BOARD

As required by the German Stock Corporation Act (Aktiengesetz), the German
Co-determination Act (Mitbestimmungsgesetz) and our articles of incorporation, 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
electoral delegates representing the employees.

The
supervisory board elects a chairman and a deputy chairman from among its members. Unless the board elects candidates for chairman and deputy chairman with at least a
two-thirds majority of votes cast, 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 votes cast. In the event of a deadlock, passing a resolution requires 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 elected for the maximum permissible term, a member's term expires
at the end of the annual general shareholders' meeting following the fourth fiscal year after 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. The rules of procedure for our supervisory board, however, provide that future candidates under consideration for a full term
of office on our supervisory board should generally not exceed the age of 68 at the time of their election.

The
following individuals left our supervisory board in 2009:



Except
for Mr. Owens and Mr. Wössner, all shareholder representatives on the supervisory board whose terms expired in 2009 were re-elected to the
supervisory board on April 8, 2009 for the following terms:



In
addition, at the annual general meeting held on April 8, 2009, our shareholders elected Gerard Kleisterlee and Lloyd G. Trotter as new members of our supervisory board
representing the shareholders, each for a period until the end of the annual meeting that passes a resolution on the ratification of the actions of the boards for the 2013 financial year.

Jörg
Spies was appointed by the local district court as a member of the supervisory board representing the employees, effective January 5, 2010, for a term ending
with the end of the annual general meeting in 2013.

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The
term of office of Arnaud Lagardére will expire at the end of the annual general meeting of shareholders to be held on April 14, 2010. Our supervisory board has
proposed Dr. Paul Achleitner, a member of the board of management of Allianz SE, as a candidate for election to the supervisory board.

The
following table shows the name, age (as of March 3, 2010), principal occupation, and other information regarding each current member of our supervisory board. Employee
representatives are identified by an asterisk.

Dr. Manfred Bischoff,

Age:

67Chairman

First elected (as a member of the supervisory board):

2006Term expires:

2011Principal Occupation:

Chairman of the Supervisory Board of Daimler AGOther Supervisory Board Memberships/Directorships:

Fraport AG; Royal KPN N.V.; SMS GmbH (Chairman); UniCredit S.p.A.; Voith AGErich Klemm*,

Age:

55Deputy Chairman

First elected:

1998Term expires:

2013Principal Occupation:

Chairman of the General Works Council, Daimler AG and Daimler GroupSari Baldauf

Age:

54First elected:

2008Term expires:

2013Principal Occupation:

Former Executive Vice President and General Manager of the Networks Business Group of Nokia CorporationOther Supervisory Board Memberships/Directorships:

Hewlett-Packard Company; F.Secure Corporation; CapMan OYj, Fortum OYjDr. Clemens Börsig

Age:

61First elected:

2007Term expires:

2012Principal Occupation:

Chairman of the Supervisory Board of Deutsche Bank AGOther Supervisory Board Memberships/Directorships:

Linde AG; Bayer AG; Emerson Electric Co.Prof. Dr. Heinrich Flegel*

Age:

61First elected:

2003Term expires:

2013Principal Occupation:

Director, Research Materials, Lightweight Design and Manufacturing, Daimler AG; Chairman of the Management Representative Committee, Daimler Group


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Dr. rer. nat. Jürgen Hambrecht

Age:

63First elected:

2008Term expires:

2013Principal Occupation:

Chairman of the Board of Executive Directors of BASF SEOther Supervisory Board Memberships/Directorships:

Deutsche Lufthansa AGJörg Hofmann*

Age:

54First elected:

2008Term expires:

2013Principal Occupation:

District Manager Baden-Württemberg, German Metalworkers' UnionOther Supervisory Board Memberships/Directorships:

Robert Bosch GmbH; Heidelberger Druckmaschinen AGDr. Thomas Klebe*

Age:

61First elected:

2003Term expires:

2013Principal Occupation:

General Counsel, German Metalworkers' UnionOther Supervisory Board Memberships/Directorships:

Daimler Luft- und Raumfahrt Holding AG; Thyssen Krupp Materials International GmbHGerard Kleisterlee

Age:

63First elected:

2009Term expires:

2014Principal Occupation:

President and CEO of Royal Philips Electronics N.V.Other Supervisory Board Memberships/Directorships:

De Nederlandsche Bank N.V.Arnaud Lagardère

Age:

48First elected:

2005Term expires:

2010Principal Occupation:

General Partner and CEO of Lagardère SCAOther Supervisory Board Memberships/Directorships:

Hachette SA; EADS N.V.; EADS Participations B.V.; Hachette Livre (SA); Lagardère Services (SAS) (Chairman); Lagardère Active (SAS) (Chairman); Lagardère (SAS);
Lagardère Capital & Management (SAS); Arjil Commanditée  Arco (SA); Lagardère Ressources (SAS); Lagardère Sports (SAS) (Chairman); SOGEADE Gérance (SAS); Lagardère Unlimited INC
(President); Lagardère Unlimited LLC


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Jürgen Langer*

Age:

55First elected:

2003Term expires:

2013Principal Occupation:

Chairman of the Works Council of the Frankfurt/Offenbach Dealership, Daimler AGAnsgar Osseforth*

Age:

63First elected:

2008Term expires:

2013Principal Occupation:

Manager, Mercedes-Benz Research and Development; Member of the Works Council, Sindelfingen Plant, Daimler AGValter Sanches*

Age:

46First elected:

2007Term expires:

2013Principal Occupation:

Secretary of International Relations of Confederação Nacional dos Metalúrgicos/CUT (National Confederation of Metalworkers Brazil)Dr. rer. pol. Manfred Schneider

Age:

71First elected:

1998Term expires:

2011Principal Occupation:

Chairman of the Supervisory Board of Bayer AGOther Supervisory Board Memberships/Directorships:

RWE AG (Chairman); Linde AG (Chairman); TUI AGStefan Schwaab*

Age:

57First elected:

2000Term expires:

2013Principal Occupation:

Vice Chairman of the Works Council, Gaggenau Plant, Daimler AG; Vice Chairman of the General Works Council, Daimler AG and Daimler GroupJörg Spies*

Age:

48First elected:

2010Term expires:

2013Principal Occupation:

Chairman of the Works Council, Headquarters, Daimler AGLloyd G. Trotter

Age:

64First elected:

2009Term expires:

2014Principal Occupation:

Former Vice Chairman General Electric, President & CEO of the General Electric Group's Industrial division Managing Partner, Founder, GenNx360 Capital PartnersOther Supervisory Board Memberships/Directorships:

PepsiCo Inc.; Textron Inc.


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Dr. h.c. Bernhard Walter

Age:

67First elected:

1998Term expires:

2014Principal Occupation:

Former Spokesman of the Board of Management of Dresdner Bank AGOther Supervisory Board Memberships/Directorships:

Bilfinger Berger AG (Chairman); Deutsche Telekom AG; Henkel AG & Co. KGaAUwe Werner*

Age:

57First elected:

2007Term expires:

2013Principal Occupation:

Chairman of the Works Council, Bremen Plant, Daimler AGLynton R. Wilson

Age:

69First elected:

1998Term expires:

2011Principal Occupation:

Chairman of the Board of CAE Inc.; Chancellor, McMaster University


The
supervisory board held eight meetings in 2009. It has established and maintains the following committees responsible for compensation, audit and nomination
matters:



As
required by the German Co-determination Act, we also have a mediation committee(Vermittlungsausschuss). The committee was
not required to take action in 2009. The charge of the mediation committee is to resolve any impasse among the members of the supervisory board in the event the supervisory

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board
is unable to achieve the two-thirds supermajority vote of its members required to appoint or dismiss a member of the board of management. The current members of the mediation
committee are Manfred Bischoff, Thomas Klebe, Erich Klemm and Manfred Schneider.

The
business address of the members of our supervisory board is the same as our business address, which is Mercedesstrasse 137/1, 70327 Stuttgart, Germany.

BOARD OF MANAGEMENT

Our articles of incorporation 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 six members.

Although
the German Stock Corporation Act permits five year terms for members of the board of management, our supervisory board decided to limit, as a general rule, appointments and
reappointments of members of the board of management to a period of three years. 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 a 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, age (as of March 3, 2010), and other information regarding each current member of our board of management. The table also reflects the following
changes that occurred in 2009 and 2010:



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Dr.-Ing. Dieter Zetsche

Age:

56First appointed:

1998Term expires:

December 2013Responsible for:

Chairman of the Board of Management Daimler AG and Head of Mercedes-Benz CarsPrior Position:

Member of the Board of Management responsible for Chrysler GroupDr. rer. pol. Wolfgang

Age:

49Bernhard

First appointed:

2000 until 2004Term expires:

February 2013Responsible for:

Production and Procurement Mercedes-Benz Cars; Mercedes-Benz VansPrior Position:

Executive Vice President of Mercedes-Benz VansWilfried Porth

Age:

51First appointed:

2009Term expires:

April 2012Responsible for:

Human Resources & Labor Relations DirectorPrior Position:

Executive Vice President of Mercedes-Benz Vans; Executive Vice President, CEO Mitsubishi Fuso Truck & Bus Corporation (MFTBC) JapanAndreas Renschler

Age:

51First appointed:

2004Term expires:

September 2013Responsible for:

Daimler TrucksPrior Position:

Executive Vice President of smart businessBodo Uebber

Age:

50First appointed:

2003Term expires:

December 2011Responsible for:

Finance & Controlling / Daimler Financial ServicesPrior Position:

Deputy Member of the Board of Management responsible for Financial ServicesDr.-Ing. Thomas Weber

Age:

55First appointed:

2003Term expires:

December 2013Responsible for:

Group Research & Mercedes-Benz Cars DevelopmentPrior Positions:

Deputy Member of the Board of Management responsible for Research & Technology


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COMPENSATION

Supervisory Board

The compensation we pay to our supervisory board members is established in our articles of incorporation. Each member of our
supervisory board receives €100,000 annually for serving on the board plus reimbursement of expenses. The chairman of our supervisory board receives three times that amount. We pay
twice that amount to the deputy chairman of the supervisory board and the chairman of the audit committee, 1.5 times that amount to the chairmen of other supervisory board committees and for members
of the audit committee, and 1.3 times that amount to members of all other 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. We only compensate a member for service on a committee if the relevant committee has held at least one meeting in the relevant
fiscal year to discharge its duties. 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.

In
light of the measures taken to reduce labor costs at Daimler AG, our supervisory board unanimously resolved that each member of the board would waive 10% of his or her respective
individual compensation, including meeting fees, during the period from May 1, 2009, through June 30, 2010.

The
following table sets forth the compensation we paid members of our supervisory board for services to Daimler in all capacities (other than compensation paid to employee
representatives on the supervisory board in their capacity as Daimler employees) for the year ended December 31, 2009, as disclosed in accordance with the German Corporate Governance Code.

Name

Compensated Function(s)

Compensation
(in €)Dr. Manfred Bischoff

Chairman of the Supervisory Board, the Presidential Committee and the Nomination Committee


293,613Erich Klemm1

Deputy Chairman of the Supervisory Board, the Presidential Committee and the Audit Committee


206,595Sari Baldauf

Member of the Supervisory Board


101,758Dr. Clemens Börsig

Member of the Supervisory Board and the Audit Committee


153,572Prof. Dr. Heinrich Flegel

Member of the Supervisory Board


101,758Dr. Jürgen Hambrecht

Member of the Supervisory Board


100,658Jörg Hofmann1

Member of the Supervisory Board


100,658Dr. Thomas Klebe1,3

Member of the Supervisory Board and the Presidential Committee


133,924Gerard Kleisterlee

Member of the Supervisory Board (since April 8, 2009)


70,782Arnaud Lagardère

Member of the Supervisory Board


96,478Jürgen Langer1

Member of the Supervisory Board


101,758Helmut Lense1

Member of the Supervisory Board (until December 31, 2009)


101,758Ansgar Osseforth4

Member of the Supervisory Board


101,758William A. Owens

Member of the Supervisory Board (until April 8, 2009)


31,249Valter Sanches2

Member of the Supervisory Board


101,758


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Name

Compensated Function(s)

Compensation
(in €)Dr. Manfred Schneider

Member of the Supervisory Board, the Presidential Committee and the Nomination Committee


133,924Stefan Schwaab1

Member of the Supervisory Board and the Audit Committee


155,772Lloyd G. Trotter

Member of the Supervisory Board (since April 9, 2009)


70,782Dr. h.c. Bernhard Walter

Member of the Supervisory Board and Chairman of the Audit Committee


202,415Uwe Werner1

Member of the Supervisory Board; Chairman of the Works Council, Bremen Plant, Daimler AG


101,758Lynton R. Wilson5

Member of the Supervisory Board and the Nomination Committee


130,844Dr. Mark Wössner

Member of the Supervisory Board (until April 8, 2009)


31,249


1These
employee representatives have stated that their board compensation will be transferred to the Hans-Böckler Foundation in accordance with the guidelines
of the German Trade Union Federation. The Hans-Böckler Foundation is a German not-for-profit organization of the German Trade Union Federation.2Mr. Sanches
has directed that his board compensation shall be paid to the Hans-Böckler Foundation.3Dr. Klebe
further received compensation and meeting fees of €13,700 for his board services at Daimler Luft- und Raumfahrt Holding AG. These
compensation and fees will also be transferred to the Hans-Böckler Foundation.4Mr. Osseforth
has directed that a portion of his board compensation shall be paid to a foundation calledTreuhandstiftung
Erwachsenenbildung.5Mr. Wilson
also received €788 for his board services at Mercedes-Benz Canada Inc.


Board of Management

We have entered into service agreements with members of our board of management. Pursuant to the compensation structure adopted by the
supervisory board, the 2009 compensation consisted of the following three principal elements:



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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 Daimler shares throughout the period of their board membership.

The
compensation paid by Group companies to the members of our board of management consists of compensation paid in cash, the grant value of long term incentive components and benefits
in kind. The latter consist mainly of the provision of company cars and payment of expenses for security precautions.

The
following table shows the base salary and the variable compensation of the members of the board of management for the year 2009. The presentation in the table below complies with
German Accounting Standard DRS 17. In line with DRS 17, we present the long-term share-based compensation
based on the value of the phantom shares at the time they were granted in February 2009. The number of phantom shares allocated to a particular board of management member may change by the time of the
payout in 2013. Whether and to what extent there is a payout depends on whether internal and external performance targets during the relevant period are achieved.

In
light of the measures taken to reduce labor costs at Daimler AG, the members of our board of management proposed to waive 15% of their base compensation during the period from
May 1, 2009 through June 30, 2010. The proposal was approved by the presidential committee of our supervisory board.

Long-term variable
compensation (PPSP)(in thousands of euro, except for Number of PPSPs)

Base
Salary

Waived compensation

Short-term
variable
compensation
(Annual bonus)

Number

Value when
PPSPs granted
(at a share
price of €18.82)

TotalDr. Dieter Zetsche


1,530


-153


689


114,967


2,164


4,230Wilfried Porth1


382


-53


172








501Andreas Renschler


575


-58


305


51,317


966


1,788Bodo Uebber2


660


-66


297


54,975


930


1,821Dr. Thomas Weber


545


-55


245


48,809


919


1,654Günther Fleig3


148





45





216


409Dr. Rüdiger Grube4


187





56








243Total


4,027


-385


1,809


270,068


5,195


10,646


1Wilfried
Porth became a member of the board of management, effective April 8, 2009.2The
PPSP-value reflects the deduction of compensation in the amount of €104,500 received in his capacity as a member of the board of directors of an equity
investee.3The
term of office of Günther Fleig ended on April 8, 2009. The PPSP-value corresponds to the payout terms in the year of his withdrawal.4The
term of office of Dr. phil. Rüdiger Grube ended on April 30, 2009. The PPSP-value corresponds to the payout terms in the year of his
withdrawal. The PPSP value also reflects the deduction of compensation in the amount of €108,000 received in his capacity as a member of the board of directors of an equity investee.


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(in thousands of euro)

Taxable
non-cash benefitsDr. Dieter Zetsche


112Wilfried Porth1


346Andreas Renschler


251Bodo Uebber


114Dr. Thomas Weber2


252Günther Fleig3


42Dr. Rüdiger Grube4


71Total


1,188


1Wilfried
Porth became a member of the board of management, effective April 8, 2009. The taxable non-cash benefits of Mr. Porth reflect the deduction of
compensation in the amount of €3,000 received in his capacity as a member of the board of directors of a wholly owned subsidiary.2Including
an anniversary bonus of €45,500.3The
term of office of Günther Fleig ended on April 8, 2009.4The
term of office of Dr. phil. Rüdiger Grube ended on April 30, 2009. The taxable non-cash benefits of Mr. Grube reflect the deduction
of compensation in the amount of €30,400 received in his capacity as a member of the board of directors of an equity investee.


Retirement Provisions.Until the end of 2005, our German board of management members had pension agreements which included a commitment
to an annual
retirement pension, calculated contingent on the years of service as a percentage of the member's base salary (70% for Dieter Zetsche, 69% for Günther Fleig, 60% for
Rüdiger Grube and Thomas Weber, and 50% for Andreas Renschler and Bodo Uebber, and 35% for Wilfried Porth). Those pension rights remain, but have been frozen at that level. Retirement
pensions start at request if the term of service ends at or after the age of 60, or are paid as disability pensions if the term of service ends before age 60 due to disability. The agreements provide
for a 3.5% annual increase in benefits, except that Wilfried Porth's benefits will increase in accordance with applicable law. Similar to retirement pensions payable under arrangements with our German
workforce, a provision for widows and orphans is included.

Effective
January 1, 2006, for service in 2006 and beyond, we substituted the pension agreements with a defined-contribution pension system similar to the one existing for senior
management below the board of management level. Under this pension system, each board of management member is credited with a capital component each year. This capital component comprises an amount
equal to 15% of the sum of the board of management member's fixed base salary and the annual bonus that was actually achieved, multiplied by an age factor equivalent to a certain rate of return, at
present 6% (Wilfried Porth: 5%). This pension benefit is payable at the age of 60 at the earliest.

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The
following table sets forth the 2009 service costs of the pension plans for our board of management:

(in thousands of euro)

Service costs in connection
with pension plans1Dr. Dieter Zetsche


629Wilfried Porth2


88Andreas Renschler


215Bodo Uebber


362Dr. Thomas Weber


240Günther Fleig3


Dr. Rüdiger Grube4


126Total


1,660


1Service
costs represent the increase in 2009 of the present value of the defined pension benefit obligation resulting from service of the respective member of the board of management in
2009. Service costs do not include interest costs, i.e., the increase in 2009 of the present value of the defined pension benefit obligation arising from the fact that the benefit obligation
with respect to the respective board member is one year closer to settlement.2Wilfried
Porth became a member of the board of management, effective April 8, 2009.3The
term of office of Günther Fleig ended on April 8, 2009.4The
term of office of Dr. phil. Rüdiger Grube ended on April 30, 2009.




The
overall accrual at December 31, 2009 to provide pension, retirement and similar benefits to the board of management was €5.2 million lower than at
December 31, 2008 due to changes in the composition of our board of management.

Benefits to board of management members upon termination of their services.

No severance payments are established for board of management members in case of early termination of their service contracts. If a
service contract with a member of the board of management, which in general is only concluded for a period of 3 years, is terminated early by mutual consent, we have a commitment under the
service contract to pay the base salary and to provide a company car until the end of the original service period. With respect to short-term performance-based compensation, the member is
only entitled to a pro-rata payment for the respective fiscal year until the day when the board of management member leaves the company. Whether the member is entitled to receive any
payment with respect to performance-related compensation components with a long-term incentive effect depends on the exercise conditions specified in the respective long-term
incentive plan.

If
the service contract of any of the current board of management members expires and is not extended, in general the member will be entitled to receive pension payments and a company
car for the period beginning after the end of the service period.

For
further information regarding compensation of our supervisory board and our board of management, please refer to Note 35 to our Consolidated Financial Statements. For further
information regarding stock based compensation and incentives, please refer to Notes 1 and 20 to our Consolidated Financial Statements.

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EMPLOYEES AND LABOR RELATIONS

At December 31, 2009, we employed a workforce of 256,407 people worldwide, 6% less than in the prior year. The reduction was
primarily the result of the repositioning of the Group's truck business in North America, the expiration of temporary employment arrangements that were not renewed or replaced, and employees who left
the Group pursuant to early retirement agreements entered into in prior years. The following table shows the number of employees at December 31, 2009, 2008, and 2007, adjusted to reflect
changes in segment composition:

Employees at December 31,2009

2008

2007Total

Germany

U.S.

Total

Germany

U.S.

Total

Germany

U.S.Daimler Group


256,407


162,565


17,697


273,216


167,753


22,476


272,382


166,679


24,053thereof:Mercedes-Benz Cars


93,572


83,156


2,992


97,303


85,046


3,782


97,526


85,322


3,869Daimler Trucks


70,699


28,582


11,026


79,415


30,060


15,004


80,067


28,975


16,667Mercedes-Benz Vans


15,226


10,202


72


16,775


11,088


111


17,524


11,226


154Daimler Buses


17,188


8,420


739


18,110


8,374


734


17,286


8,032


662Daimler Financial Services.


6,800


2,404


1,047


7,116


2,451


1,121


6,743


2,410


1,088Sales organization for automotive business


47,625


24,980


1,783


49,127


25,865


1,690


48,078


25,940


1,613




The
table above also includes temporary employees. On average, we had approximately 4,400 temporary employees in 2009 (9,300 in 2008).

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 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.

In
November 2008, the regional associations of employers and the German metalworkers' union concluded a collective bargaining agreement covering the period from November 1, 2008
through April 30, 2010. The agreement provides for a lump sum payment of €510 to each covered employee for the first three months of the contract period. A 2.1% increase in base
salary became effective on February 1, 2009. The effectiveness of another 2.1% increase in base salary that was originally scheduled for May 1, 2009 was postponed until October 1,
2009 pursuant to an agreement with the works council and in accordance with the
applicable collective bargaining agreement. An additional base salary increase of 0.4% for the four-month period from January to April 2010 will be used to fund the existing early
retirement program in lieu of a cash payout.

In
response to decreasing unit sales, we reached agreements with the works councils of all manufacturing plants in Germany to reduce the number of hours worked per week
(Kurzarbeit) during 2009 by the workers in those plants. The agreements have the effect of reducing the wages we pay to the workers in the affected
plants. The employees were partially compensated for the reduction in wages by the German employment agency (Agentur für Arbeit).

In
the first two quarters of 2010, we plan to continue theKurzarbeitregime in select German manufacturing plants, and we may continue
that regime, or even expand it to include other plants, if economic conditions remain weak or deteriorate further.

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Pursuant
to an agreement with the works councils, all employees not subject to the shorter work hour regime are subject to an 8.75% reduction of hours worked from May 1, 2009
through June 30, 2010. During that period, the compensation payable to employees affected by the reduction is being reduced by the same percentage. In addition, during the period from
May 1, 2009 through June 30, 2010, the base salaries of senior management employees are being reduced by 5% to 10%, depending on their level of management.

Beginning
in the first quarter of 2010, Daimler Trucks North America LLC plans to negotiate new collective bargaining agreements at its major facilities in the U.S. and Mexico. In
general, the agreements have a duration of three years and include specific provisions regarding wages, fringe benefits, and working conditions. Negotiations in the U.S.-based production facilities
will focus on overall labor cost and production efficiency. As a result of decreased unit sales in 2009, Daimler Trucks North America LLC significantly reduced employment levels of union
employees at its production facilities through involuntary workforce reductions. In addition, work schedules were adjusted through periodic one-week production shut downs. For information
on the repositioning of the business operations of Daimler Trucks North America and specific measures initiated in this regard, please refer to the discussion under the heading "Daimler Trucks" in
"Item 4. Information on the Company."

SHARE OWNERSHIP

As of December 31, 2009, the current members of our supervisory board and our board of management, as a group, owned 157,230 of
Daimler AG ordinary shares (0.02% of shares outstanding at that date) and had the right to acquire 1,667,000 ordinary shares pursuant to options granted under the plans described below.

In
2000, we instituted a shareholder approved stock option plan covering employees of management levels 3 and above and the members of our board of management. We granted options
under this plan in 2000, 2001, 2002, 2003 and 2004. For a description of that stock option plan and further details, such as the exercise prices of the various tranches, please refer to Note 20
to our Consolidated Financial Statements.

As
part of our value-based management approach, we support employee stock ownership. We generally offer employees of Daimler AG and of our subsidiaries in Germany, Austria, France,
Italy, the Netherlands, Portugal, Spain, Switzerland and the United Kingdom the opportunity to purchase Daimler AG ordinary shares. In 2008, for example, each eligible employee in Germany had the
right to acquire up to 90 shares with a maximum aggregate discount of €135 plus three bonus shares. In total, employees in Germany acquired approximately 1,428,000 shares in 2008. The
programs established for employees in other European countries are comparable to the German program, except for changes resulting from different national legal requirements. In response to the
worldwide economic downturn, we temporarily suspended these employer sponsored employee stock ownership programs in 2009, except in the United Kingdom where legal obligations prohibited us from doing
so. In the United Kingdom, employees acquired a total of approximately 4,700 shares in 2009.

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Item 7. Major Shareholders and Related Party Transactions.

MAJOR SHAREHOLDERS

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

In
March 2009, Daimler AG increased its share capital by issuing 96.4 million new ordinary shares to Semare Beteiligungsverwaltungsgesellschaft mbH, an indirect subsidiary of
Aabar Investments PJSC (Aabar) of Abu Dhabi. On April 1, 2009, Aabar and some of its affiliates notified the U.S. Securities and Exchange Commission on Schedule 13G under the Securities
Exchange Act of 1934 that they beneficially own 96,408,000 Daimler AG ordinary shares, representing 9.4% of outstanding Daimler AG ordinary shares.

On
February 16, 2009, the Kuwait Investment Authority informed us that, as of December 31, 2008, they held 73,169,320 shares. Based on the number of Daimler AG's ordinary
shares outstanding as of December 31, 2009, that holding would have represented 7.1% of our outstanding ordinary shares.

Under
the German Securities Trading Act (Wertpapierhandelsgesetz), shareholders of a listed German company and holders of certain
financial instruments must notify the company of the level of their holding whenever it reaches, exceeds, or falls below specified thresholds. For additional information regarding these reporting
obligations, please refer to the discussion under the heading "Articles of Incorporation  Disclosure of Shareholdings" in "Item 10. Additional Information."

BlackRock
informed us that as at December 1, 2009, BlackRock, Inc., the ultimate parent entity of the BlackRock group, indirectly held, through various subsidiaries, a
total of 3.9% or 41,372,761 of Daimler AG's shares. Based on the number of Daimler AG ordinary shares outstanding as of December 31, 2009, the holding of BlackRock, Inc. would have
represented 4% of our outstanding ordinary shares.

Capital
Research and Management Company, which previously informed us that it held 30,688,637 of Daimler AG's ordinary shares, notified us that, as of November 4, 2009, its
holdings fell below the 3% threshold.

As
of December 31, 2009, Daimler AG held 37,116,831 shares, representing 3.6% of its outstanding ordinary shares, in treasury. We acquired these shares in 2008 in connection with
a share buy-back program. For further information regarding that share buy-back program please refer to the discussion in "Item 16E. Purchases of Equity Securities by the Issuer and Affiliated
Purchasers" and to Note 19 to our Consolidated Financial Statements. We plan to use a portion of the shares held in treasury to satisfy our obligations to former AEG minority shareholders
following a recent court decision. For further information, please refer to the discussion under the heading "Legal Proceedings" in "Other Financial Information" in "Item 8. Financial
Information."

As
of December 31, 2009, Daimler AG had approximately 1.2 million stockholders. Approximately 155,000 were U.S. holders, of which approximately 55,000 were record holders.
Based on our share register, U.S. holders held approximately 17% of Daimler AG's ordinary shares as of that date.

RELATED PARTY TRANSACTIONS

For a description of our related party transactions, please refer to Note 34 to our Consolidated Financial Statements.

Item 8. Financial Information.

CONSOLIDATED FINANCIAL STATEMENTS

Please refer to "Item 18. Financial Statements" and to pages F-1 through F-98 of this annual
report.

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OTHER FINANCIAL INFORMATION

Export Sales

In 2009, we exported approximately 605,500 or 67% of all passenger cars, trucks, buses, and vans we produced in Germany and
approximately 63,100 or 40% of all passenger cars and trucks we produced in the United States.

Legal Proceedings

Various legal proceedings, claims and governmental investigations are pending against the Group on a wide range of topics, including
vehicle safety, emissions and fuel economy; financial services; dealer, supplier and other contractual relationships; intellectual property rights; product warranties; environmental matters; and
shareholder matters. 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
successor to Daimler-Benz AG, Daimler AG is a party to a valuation proceeding (Spruchverfahren) 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 Frankfurt Regional Court
(Landgericht Frankfurt am Main) claiming that the consideration stipulated in the agreement for the benefit of AEG minority shareholders, namely an
exchange ratio of one Daimler-Benz share for every five AEG shares and compensation payments for lost dividends equal to 20% of any dividends paid on Daimler-Benz shares, was
inadequate. In 1994, a court-appointed expert concluded in his report that the consideration and compensation set at the time were adequate. Following a decision by the Federal Constitutional Court
(Bundesverfassungsgericht) in an unrelated case, the Frankfurt Regional Court instructed the expert in 2000 to employ a market value approach in his
valuation analysis rather than the capitalized earnings value approach previously used. In 2004 the court also instructed the expert to take into account additional findings of the Federal Supreme
Court (Bundesgerichtshof) elaborating further on the valuation issue addressed by the Federal Constitutional Court. In September 2007, the Frankfurt
Regional Court ruled that the market value approach must be applied and that, as a result, the exchange ratio should have been one Daimler-Benz share for every 2.9 AEG shares and the
compensation payments for lost dividends should have been equal to 34.5% of any dividends paid on Daimler-Benz shares. We appealed the decision of the Frankfurt Regional Court to the
Higher Regional Court (Oberlandesgericht) Frankfurt am Main. The appeal was finally dismissed in November 2009. Following this decision, Daimler AG will
have to deliver up to 4.3 million additional Daimler shares to former AEG minority shareholders and make dividend compensation payments, including on any additional Daimler shares delivered, up
to a maximum total amount of approx. €150 million. We intend to use a portion of the ordinary shares we hold in treasury to satisfy these obligations. Please also refer to
Note 19 to our Consolidated Financial Statements.

In
1999, former shareholders of Daimler-Benz AG instituted a valuation proceeding (Spruchverfahren) against Daimler AG at the
Stuttgart Regional Court (Landgericht Stuttgart). The proceeding relates to the merger of Daimler-Benz AG and Daimler AG in connection with
the business combination of Daimler-Benz AG and Chrysler Corporation in 1998. In the course of the merger, 1.8% of the total outstanding Daimler-Benz AG ordinary shares were
involuntarily exchanged for DaimlerChrysler (now Daimler) shares. In their complaint, the shareholders claim that the ratio used for the involuntary exchange did not represent the actual value of
Daimler-Benz ordinary shares at the time. An expert commissioned by the court presented his opinion in December 2005, in which he presented various valuation alternatives. These
alternatives range from confirming the appropriateness of the original exchange ratio used to considerable additional payments to be made to those former Daimler-Benz shareholders whose
shares were involuntarily exchanged. In August 2006, the Stuttgart Regional Court ruled that Daimler must make an additional cash payment of €22.15 per share (approximately
€328 million in the aggregate). Under German law, interest would have to be added to any such additional payment at the statutory annual rate. We continue to believe that the
exchange ratio used by Daimler-Benz AG at the time of the involuntary exchange was appropriate and we appealed the decision of the Stuttgart Regional Court in September

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2006.
The Higher Regional Court in Stuttgart (Oberlandesgericht Stuttgart) held evidentiary hearings in October 2008 and received additional written
testimony in September 2009. A decision by the Higher Regional Court is expected in the first quarter of 2010.

Various
legal proceedings are pending against us alleging defects in different vehicle models. 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 of these proceedings could require us to pay substantial compensatory and punitive damages, or undertake service actions, recall campaigns or other costly actions.

Purported
class action lawsuits alleging violations of antitrust law were instituted against Daimler's North American subsidiaries Mercedes-Benz USA, LLC, and
Mercedes-Benz Canada, Inc., as well as other motor vehicle manufacturers, their operating subsidiaries, 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. Most of the actions against Mercedes-Benz Canada were dismissed
on jurisdictional grounds. 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 injunctive relief and treble damages on behalf of everyone who bought or leased a new vehicle in the U.S. since January 1, 2001. The federal court
actions have been consolidated in the U.S. District Court for the District of Maine for purposes of pretrial proceedings and the state cases filed in California have been consolidated in the
California Superior Court in San Francisco County. The federal court action has been voluntarily dismissed against Mercedes-Benz USA. The California actions have also been voluntarily
dismissed against Mercedes-Benz USA. We do not believe that we have engaged in any unlawful conduct and will continue to defend ourselves vigorously in the remaining state court actions to
the extent that they are pursued against Mercedes-Benz USA.

A
purported class action lawsuit in the Superior Court of Ontario, Canada, alleging violation of Canadian antitrust laws is pending against Daimler's North American subsidiaries
Mercedes-Benz Canada and Mercedes-Benz USA along with other vehicle manufacturers. The complaint alleges that since 2005 the companies conspired with agencies of the Canadian
government to prevent or lessen competition in the importation of U.S. versions of their respective brand vehicles into Canada by artificially requiring modifications to U.S. vehicles to be brought up
to Canadian vehicle safety standards. They seek Canadian $250 million in compensatory damages and Canadian $25 million in punitive damages. We do not believe that we have engaged in any
unlawful conduct and will defend ourselves vigorously.

The
Federal Republic of Germany initiated arbitration proceedings against Daimler Financial Services AG, Deutsche Telekom AG and Toll Collect GbR and submitted its statement of claims in
August 2005. It seeks damages, contractual penalties and the transfer of intellectual property rights to Toll Collect GmbH. In particular, the Federal Republic of Germany is claiming lost
revenue of €3.33 billion for the period September 1, 2003, through December 31, 2004 plus interest (€1.1 billion through May 18, 2009
plus 5% per annum over the respective base rate since then), and contractual penalties of approximately €1.65 billion through July 31, 2005 plus interest
(€107 million through July 31, 2005 plus 5% per annum over the respective base rate since then) plus refinancing costs of €56 million. 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. Defendants submitted their response to the statement of claims on June 30, 2006. The Federal Republic of Germany delivered its reply to the arbitrators on
February 15, 2007, and defendants delivered their rebuttal on October 1, 2007. The arbitrators held the first hearing on June 16 and 17, 2008. Additional briefs from the claimant
and the defendants were filed in May 2009. Following a motion by defendants to disqualify the arbitrator nominated by the claimant, the arbitration panel canceled a hearing scheduled for October 2009.
We do not expect the hearing to be rescheduled before the motion to disqualify has been finally resolved. We believe the claims are without merit and will continue to defend ourselves vigorously.

In
connection with the settlement in May 2007 of previously reported litigation brought by MAN against Freightliner Ltd., certain of its subsidiaries and affiliates, and Daimler
North America Corporation in London and

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Oregon,
and a related order of the Oregon Circuit Court vacating a punitive damage award, the State of Oregon, which was not a party to the original litigation, appealed the order vacating the
punitive damage award to the Court of Appeals of the State of Oregon alleging that, pursuant to Oregon law, it was a judgment creditor with respect to 60% of any punitive damage award. In a decision
dated February 20, 2008, the Court of Appeals accepted that the State of Oregon has standing to pursue the appeal. That decision was appealed to the Oregon Supreme Court. The State of Oregon
also separately filed a lawsuit in the Circuit Court for the State of Oregon for the County of Marion against, inter alia, Freightliner LLC, Freightliner Ltd., Daimler North America
Corporation and Daimler AG seeking a declaratory judgment that the settlement and the judgment vacating the punitive damage award were not binding on the State and that the State was a judgment
creditor in the amount of US$210 million. In March 2009, the case was settled with a commitment by Daimler Trucks North America LLC (formerly known as Freightliner LLC) to
contribute US$150,000 to the Oregon Crime Victims Assistance Fund. Following the settlement, both the appeal and the declaratory judgment action were voluntarily dismissed.

In
February 2005, two putative class actions were brought against Detroit Diesel Corporation (DDC), one of our affiliates, and its distributors (including two DDC subsidiaries) in the
United States District Court for the Eastern District of Pennsylvania. The cases arose from the decisions of certain truck manufacturers (International, Volvo and Paccar) to stop offering DDC engines
in their trucks and the alleged resulting decision of DDC not to renew the dealer agreements of those International, Volvo and Paccar dealers who were no longer able to offer DDC engines in the trucks
they sold. Plaintiffs in the first action sought to represent a class of former Detroit Diesel dealers whose DDC dealer agreements were allegedly terminated or not renewed. Plaintiffs in the second
action sought to represent a class of Detroit Diesel dealers whose dealer agreements were allegedly initially replaced with truck maintenance agreements and then subsequently terminated or not
renewed. Plaintiffs in both actions alleged that DDC and its distributors entered into group boycott and price-fixing conspiracies to restrict the plaintiffs' ability to perform warranty repairs on
DDC engines and to charge increased prices to plaintiffs for replacement parts for DDC engines. Plaintiffs in both cases sought unspecified treble damages, declaratory relief and attorneys' fees. In
November of 2005, both cases were transferred to the United States District Court for the Eastern District of Michigan. In late 2006, plaintiffs sought and received approval for partial settlement
with six of the defendant distributors. Under the terms of the partial settlement, the six settling distributors established a US$1 million settlement fund and agreed to cooperate with the
plaintiffs in providing information requested in both actions. The cases remained pending against DDC and the non-settling distributors. In April 2007, plaintiffs moved the court to
certify a class comprising all remaining former DDC dealers that had their dealer status terminated, non-renewed or modified after February 1, 2001. In July 2009, the court approved
a settlement of both cases with respect to the remaining defendants, including DDC. DDC paid US$2,750,000 as part of that settlement.

Former
employees who retired from Detroit Diesel Corporation between 1993 and 2004 filed a class action complaint against the company in October 2005 in the U.S. District Court for the
Eastern District of Michigan. The complaint alleges that the company is obligated to provide lifetime retiree health care benefits at no cost to class members, and that the company's notification to
have them contribute toward the cost of their healthcare insurance beginning in 2006 (to the extent such cost exceeds a limit previously negotiated with the International Union, United Automobile,
Aerospace and Agricultural Implement Workers of America (UAW)) is invalid. The court granted a preliminary injunction in December 2005 that prohibits the company from requiring such contributions
while the lawsuit is pending. The U.S. Court of Appeals for the Sixth Circuit upheld the injunction in January 2007. Cross motions for summary judgment were filed and oral argument was held in May
2008 in the United States District Court. On February 10, 2009, the District Court granted the Plaintiff's motion for summary judgment and denied Detroit Diesel Corporation's motion for summary
judgment. Detroit Diesel Corporation has appealed the decision to the U.S. Court of Appeals for the Sixth Circuit and will continue to defend itself vigorously.

Several
lawsuits, including putative class action lawsuits, were filed in 2002 against a large number of companies from a wide variety of industries and different countries asserting
claims relating to the practice of apartheid in South Africa. One of the putative class action lawsuits named Daimler AG as a defendant. The

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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 Daimler. Upon plaintiffs' appeal, the Court of Appeals for the Second Circuit partly vacated the District Court's decision on October 12, 2007, and remanded the
case back to the District Court for further
proceedings. In January 2008, the defendant group filed a petition for a writ of certiorari with the Supreme Court of the United States. The Supreme Court lacked a quorum to hear the case and, by
operation of the rules, affirmed the Court of Appeals as if by an equally divided court. In November 2008, plaintiffs filed two amended purported class action complaints with the District Court
against a smaller number of companies. Both amended complaints name Daimler AG as a defendant. In December 2008, a group of defendants, including Daimler AG, again filed a motion to dismiss the
amended complaints. In April 2009, the District Court granted in part and denied in part the defendants' motions to dismiss the amended complaints. The defendants, including Daimler, applied for and
were granted by the Second Circuit emergency appellate review of the parts of the District Court's order denying the motions to dismiss. The matter is currently pending under stay in the Second
Circuit.

In
2008, Daimler AG was sued in Hong Kong by an individual claiming lost profits from an injunction that Daimler-Benz AG had applied for in 1994 against the plaintiff in Hong
Kong. Daimler withdrew its application 17 days later following an agreement with the plaintiff that he would not claim damages against Daimler in connection with the application. We believe the
claim is without merit and will defend ourselves vigorously.

As
previously reported, the U.S. Securities and Exchange Commission ("SEC") and the U.S. Department of Justice ("DOJ") are conducting an investigation into possible violations of law by
Daimler including the anti-bribery, record-keeping and internal control provisions of the U.S. Foreign Corrupt Practices Act (FCPA). We have voluntarily shared 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 have provided the agencies with
information pursuant to outstanding subpoenas and other requests. We have also had communications with and provided documents to the offices of German public prosecutors regarding the matters that
have been under investigation by the DOJ and SEC. We have completed our internal investigation and have determined that in a number of jurisdictions, primarily in Africa, Asia and Eastern Europe,
improper payments were made which raise concerns under the FCPA, under German law, and under the laws of other jurisdictions. We have taken various actions designed to address and resolve the issues
identified in the course of our investigation to safeguard against the recurrence of improper conduct. These include establishing a company-wide compliance organization, evaluating and
revising our governance policies and internal control procedures, and taking personnel actions. We have been in discussions with the DOJ and SEC regarding consensually resolving the agencies'
investigations. There can be no assurance about whether and when settlements with the DOJ or SEC will become final and effective.

In
March 2006, the Stuttgart Regional Court (Landgericht Stuttgart) approved a model case pursuant to German law
(Kapitalanleger-Musterverfahrensgesetz) in connection with a lawsuit filed by shareholders of Daimler who claim damages based on the alleged unduly
delayed ad hoc disclosure by Daimler in July 2005 that Professor Jürgen Schrempp would leave the company at the end of 2005. In February 2007, the Stuttgart Court of Appeals
(Oberlandesgericht Stuttgart) ruled that the disclosure was timely and rejected the claim. Plaintiffs filed a complaint to the German Supreme Court
(Bundesgerichtshof). In February 2008, the German Supreme Court granted the appeal and remitted the case to a different panel of the Stuttgart Court of
Appeals. After hearing additional witness testimony, the panel ruled in April 2009 that plaintiffs were not entitled to damages. Plaintiffs have again lodged an appeal with the German Supreme Court
where the case is now pending.

In
April 2008, the French stock exchange supervisory authority, Autorité des Marchés Financiers (AMF), commenced insider trading investigations against
Daimler AG and several other companies and individuals in connection with sales of shares in European Aeronautic Defence and Space Company EADS N.V. (EADS). The AMF issued a statement of
charges against Daimler AG alleging that Daimler AG made use of inside information in connection with the divestiture of a 7.5% stake in EADS in April 2006. We filed a response with the AMF in
September 2008. Oral hearings took place in January, February and November 2009. Following the hearing in November 2009, which took place before the "Commission des Sanctions" of the AMF, the
Commission rendered

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a
final decision in December 2009, stating that it could not find any unlawful behavior on the part of Daimler in connection with its divestiture in April 2006 of a 7.5% stake in EADS.

On
Aug. 17, 2009, the Official Committee of Unsecured Creditors of Old CarCo LLC (formerly Chrysler LLC) filed a lawsuit with the United States Bankruptcy Court,
Southern District of New York, against Daimler AG, Daimler North America Corporation and certain (former) board members of Chrysler LLC. The Committee claims unspecified damages based on
theories of constructive and intentional fraudulent transfer, breach of fiduciary duty, and other legal theories, alleging that the consideration received in certain transactions effected in
connection with the investment by Cerberus in Chrysler LLC was not fair consideration. We consider these claims and allegations to be without merit and will defend ourselves vigorously.

Litigation
is subject to many uncertainties and Daimler cannot predict the outcome of individual matters with assurance. We establish a provision in connection with pending or threatened
litigation if a loss is probable and can be reasonably estimated. Since these provisions, which are reflected in our Consolidated Financial Statements, represent estimates, it is reasonably possible
that the resolution of some of these matters could require us to make payments in excess of the amounts accrued in an amount or range of amounts that could not be reasonably estimated at
December 31, 2009. It is also reasonably possible that the resolution of some of the matters for which provisions could not be made may require us to make payments in an amount or range of
amounts that could not be reasonably estimated at December 31, 2009. Although the final resolution of any such matters could have a material effect on the Group's consolidated operating results
and cash flows for a particular reporting period, we believe that it should not materially affect our consolidated financial position.

The
U.S. Internal Revenue Service (IRS) has challenged the tax treatment of certain Leveraged Leases known as Lease in, Lease out (LiLo) and Sale in, Lease out (SiLo) transactions
entered into by various companies including Daimler. In early August 2008, the IRS announced a Global Settlement Initiative for these types of transactions and after careful consideration the Daimler
AG board of management decided to accept the offer of the IRS. We prepaid US$0.6 billion towards the total liability in September 2009. Based on the methodology outlined in the initiative, we
believe that the established accrual will be adequate to cover the remaining anticipated tax liability of approximately less than US$0.2 billion. We expect to pay the remaining liability in the
first half of 2010.

Dividend Policy

We generally pay dividends each year and expect to continue to do so in the future, although the payment of future dividends will
depend on our earnings, our financial condition, our cash needs, our future earnings prospects and other factors. As a result, we may not pay dividends in the future or may not pay them at rates we
have paid in previous years. Because of the development of our earnings in 2009, our board of management and our supervisory board decided that Daimler AG will not pay a dividend for the 2009
financial year. For additional information on dividends and exchange rates please refer to "Item 3. Key Information" and "Item 10. Additional Information."

Significant Changes

Except as described elsewhere in this annual report, no significant change has occurred since the date of our Consolidated Financial
Statements included in this annual report.

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Item 9. The Offer and Listing

Trading Markets

The principal trading markets for our ordinary shares are the Frankfurt Stock Exchange and the New York Stock Exchange. Our ordinary
shares are also listed on the Stuttgart Stock Exchange. Our ordinary shares trade under the symbol "DAI".

Daimler
AG is included in theDeutsche Aktienindex(DAX), a continuously updated, capital weighted performance index of the 30 largest
German companies. The DAX is the leading index of trading on the Frankfurt Stock Exchange. As of December 31, 2009, our ordinary shares represented approximately 5.98% of the DAX. Our shares
also represented 1.29% of the Dow Jones STOXX 50®, which covers stocks from 10 European countries, and 2.05% of the Dow Jones EURO STOXX 50®, 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 Registrar Services GmbH, a
subsidiary of Deutsche Bank AG, in Germany and The Bank of New York Mellon 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 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 2009, Xetra accounted for
approximately 99.1% of the trading volume of our ordinary shares on the Frankfurt Stock Exchange. The table below shows, for the periods indicated, the Xetra high and low closing sales prices for our
ordinary shares.

Price Per Daimler
Ordinary ShareHigh

Low(€)

(€)Annual highs and lows2005


45.65


30.202006


50.09


37.012007


77.76


46.302008


64.68


19.352009


37.65


17.44Quarterly highs and lows2008First Quarter


64.68


48.24Second Quarter


55.34


39.28Third Quarter


43.37


35.40Fourth Quarter


32.38


19.352009First Quarter


27.75


17.44Second Quarter


28.16


19.28Third Quarter


34.41


23.65Fourth Quarter


37.65


31.58


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Price Per Daimler
Ordinary ShareHigh

Low(€)

(€)Monthly highs and lows2009August


33.83


30.86September


34.41


30.15October


37.62


32.65November


35.98


31.58December


37.65


34.862010January


37.55


32.32February (through February 16, 2010)


34.34


32.01




On
February 16, 2010, the closing sales price for our ordinary shares on Xetra was €32.62. This price was equivalent to US$44.83 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 2009 was
7.1 million. As of December 31, 2009, the market capitalization of our company on the Frankfurt Stock Exchange was €38.1 billion.

Trading on the New York Stock Exchange

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

Price Per Daimler
Ordinary ShareHigh

Low(US$)

(US$)Price Per Daimler Ordinary Share2005


54.83


39.032006


61.97


46.562007


111.60


60.062008


94.75


24.452009


55.95


21.58Quarterly highs and lows2008First Quarter


94.75


73.64Second Quarter


86.10


61.67Third Quarter


66.64


50.50Fourth Quarter


46.11


24.452009First Quarter


39.11


21.58Second Quarter


40.03


26.08Third Quarter


50.58


33.05Fourth Quarter


55.95


46.91


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Price Per Daimler
Ordinary ShareHigh

Low(US$)

(US$)Monthly highs and lows2009August


48.84


43.60September


50.58


42.70October


55.95


47.83November


53.93


46.91December


54.13


51.572010January


54.11


45.54February (through February 16, 2010)


47.93


44.48




On
February 16, 2010, the closing sales price for our ordinary shares on the New York Stock Exchange as reported on the NYSE Composite Tape was US$45.12.

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. The remaining Dornier minority shareholders have the right, exercisable at any time, to exchange all or any portion of their shares in Dornier for cash, for Daimler AG ordinary
shares, or for shares in our subsidiary Daimler Luft- und Raumfahrt Holding Aktiengesellschaft (DLRH) which holds a minority interest in DADC Luft- und Raumfahrt Beteiligungs
AG, the holding company of Dornier GmbH. Those Dornier shareholders who previously exchanged some of their Dornier shares for DLRH shares retain the right to exchange these DLRH shares for cash
or for Daimler AG ordinary shares and some of them have already partially exercised that right.

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 the discussion under the heading
"Share Ownership" in "Item 6. Directors, Senior Management and Employees."

ARTICLES OF INCORPORATION

Organization and Register

Daimler 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

Daimler AG has three separate governing bodies: the general meeting of shareholders, the supervisory board and the board of management.
Their roles are defined by German law and by the corporation's articles of incorporation (Satzung), and may be described generally as follows:

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

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TheSupervisory Boardconsists of twenty members. Ten members are elected by our shareholders and ten members are elected by our employees
as required by the German Co-determination Act (Mitbestimmungsgesetz). The supervisory board supervises and advises our board of management
and appoints and removes its members. Although it may not make management decisions, our supervisory board has determined specified matters which require its approval.

TheBoard of Managementwhich acts under the principle of collective responsibility manages our business. It is authorized to represent
Daimler AG and to enter into binding agreements with third parties on its behalf. The board of management submits regular reports to the supervisory board about the corporation's operations, business
strategies and financial condition and informs the supervisory board and its chairman of 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 at the same time.

Several
of our specific corporate governance provisions are summarized below.

Business Purposes

As stated in Section 2 of our articles of incorporation, our business purpose is to engage, directly or indirectly, in business
in the fields of development, production and sale of products and rendering of services, especially in the following lines of business:



Our
articles authorize us to take all actions that serve the attainment of our business purposes, except that Daimler AG is not permitted to carry out directly financial services
transactions or banking and real property transactions that require a government license.

Directors

Under German law, our supervisory board members and board of management members owe duties 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 interests of the
company, including the interests of its shareholders and employees and, to some extent, the common interest. Those who violate their duties may be held jointly and severally liable for any resulting
damages. Board members are not liable to our company if they acted pursuant to a lawful resolution of the shareholders' meeting. A board member is not liable for breach of duty for a business decision
that he or she reasonably believes is based on appropriate information and is in the company's interest. Supervisory board and board of management members are not obligated to own shares of the
corporation to qualify for board membership. We have, however, established stock ownership guidelines for members of our board of management which require that a portion of their personal assets
consist of Daimler shares. Although German law permits us to make loans to members of our supervisory board and board of management if approved by the supervisory board, the U.S. Sarbanes-Oxley Act of
2002 (also applicable to foreign private issuers like us) prohibits almost all such loans. 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

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member
by our company. The shareholder representatives of our supervisory board may be elected for varying terms of office. For further information about our supervisory board and board of management,
including compensation and term of office, please refer to "Item 6. Directors, Senior Management and Employees."

Ordinary Shares

Our capital stock consists solely of one class 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). Registrar Services GmbH, a subsidiary of 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 Mellon.

The
following is a summary of significant provisions under German law and our articles of incorporation relating to our ordinary shares:

Capital Increases.In accordance with approved or conditional capital passed upon by our shareholders, we may increase our share capital
in
consideration of cash or non-cash contributions. Approved capital provides our board of management with the flexibility to issue new shares during a period of up to five years, generally
to preserve liquidity. Conditional capital allows the issuance of new shares for specified purposes, including subscription rights (e.g. from stock option plans) for employees and members of
the board of management, mergers, and upon conversion of option bonds and convertible bonds. A resolution authorizing approved or conditional capital requires the votes of a 75% majority of the issued
shares present at the shareholders' meeting at which the resolution is proposed. Our articles of incorporation do not provide for a larger capital majority or additional requirements that are more
stringent than the law requires.

Redemption.Our share capital may be reduced by a specific resolution adopted by our shareholders. Our share capital may also be
reduced by retiring
and canceling shares purchased in a share buy-back program if the authorization by the shareholders contemplates such cancellation.

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

Liquidation.If Daimler AG were to be liquidated, any liquidation proceeds remaining after all of its liabilities are paid would be
distributed to
its shareholders in proportion to their shareholdings.

No Limitation on Foreign or Substantial Ownership.Neither German law nor our articles of incorporation 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 a dividend on our ordinary shares for a financial year if the unappropriated profits of Daimler AG for the relevant
year are sufficient to pay a dividend, our board of management and our supervisory boards propose a dividend, and the annual general meeting of our shareholders approves the declaration and payment of
a dividend. Our supervisory board approves the unconsolidated financial statements (prepared in accordance with German GAAP) of the Group's parent company, Daimler AG, proposed by our board of
management for each financial year and both boards recommend a resolution on the allocation of all unappropriated profits, including any amount of net profits to be distributed as a dividend to our
shareholders, for approval at the meeting. All shareholders holding shares on the date of the annual general meeting approving the dividend are entitled to receive the declared dividend, unless the
shares they hold were newly issued in the year of, but prior to the date of, the annual general meeting and such shares are only entitled to dividends beginning with the financial year in which the
new shares were issued. We pay dividends to shareholders in proportion to their percentage ownership of our outstanding share capital. A shareholder's right to claim a dividend expires four

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years
from the end of the year in which the shareholders' meeting adopted the resolution on the dividend and the dividend has become due for payment.

Our
articles of incorporation, 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 remaining after deducting any amounts required to be transferred
to retained earnings. Furthermore, the interim payment may not exceed 50% of the previous fiscal year's unappropriated profit.

Our
articles of incorporation provide for issuing new shares from approved and conditional capital previously authorized by the shareholders. With respect to the existing conditional
capital, 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.

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 incorporation 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 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. The supervisory board must convene a general shareholders' meeting if this is deemed necessary for the well-being of Daimler AG. There is no minimum quorum
requirement for shareholder meetings. At the annual general meeting we present the Daimler AG financial statements, the consolidated financial statements of the Group, the management reports for
Daimler AG and the Group and the report of the supervisory board. We further ask our shareholders to ratify the actions of the members of our board of management and our supervisory board during the
prior year and to approve the allocation of unappropriated profit (determined in accordance with German GAAP) of the Group's parent company, Daimler AG, and to appoint the independent auditor proposed
by the supervisory board on recommendation of the

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audit
committee. Our shareholders also elect their representatives to our supervisory board at the general meeting for terms of up to five years.

Amendments
to our articles of incorporation, resolutions regarding approved or conditional capital, the authorization of the company to buy back its own shares 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 share capital.

If
a shareholder wants to participate and vote at any of our shareholders' meetings, the shareholder must be registered in the share register on the meeting date and must also have
notified us no later than four calendar days before the meeting date (not counting the day of the meeting and the day of receipt of the notice) 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 in advance of the meeting either by signing and returning the proxy card mailed
to them or via the internet or electronic mail as specified by the company. We mail or e-mail a meeting notice to our shareholders, which includes a proxy card and an agenda describing the
items to be voted on at the meeting. 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. Unless a shorter period is permissible by law, the general shareholders' meeting
must be convened at least 30 days before the day by which shareholders must register for the meeting and we must announce the meeting, stating the agenda, in the electronic Federal Gazette (elektronischer Bundesanzeiger)and provide for Europe-wide distribution of the announcement.

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. The German Takeover Act (Wertpapiererwerbs-
und Übernahmegesetz) requires, among other things, that a bidder seeking control of a company with its corporate seat in Germany and traded on a stock exchange
in the European Economic Area must publish advance notice of a tender offer; submit a draft offer statement to the German 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 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. The Takeover Act also provides that a
company's articles of incorporation may be amended to replace the above rules on prohibiting the frustration of tender offers with more restrictive rules. Our articles do not contain any more
restrictive rules.

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 the voting rights reach, exceed or fall below specified thresholds. These thresholds are 3%, 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75% of the
corporation's voting rights. Upon reaching or crossing these thresholds, holders must promptly, and within no

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more
than four trading days, notify the issuer and concurrently the German Federal Financial Supervisory Authority.

In
addition, with respect to derivative instruments, under German law, anyone who directly or indirectly holds financial instruments that grant the holder the right to unilaterally
acquire, under a legally binding agreement, previously issued voting shares of an issuer must promptly upon obtaining, exceeding, or no longer holding
5%, 10%, 15%, 20%, 25%, 30%, 50% or 75%, and within no more than four trading days, provide notice thereof to the issuer and to the German Federal Financial Supervisory Authority. Since March 2009,
voting rights from shares and voting rights obtainable through financial instruments are aggregated for determining whether a disclosure obligation exists. In instances where a disclosure with respect
to voting rights is or has been made, an additional disclosure regarding financial instruments will not be necessary unless the aggregate amount of voting rights from or relating to all securities
meets, exceeds or falls below any of the above thresholds.

A
German issuer must publish promptly any such notice it receives, but in any event no later than three trading days after receiving the notice. The notice must be published through an
electronically operated information dissemination system, a news agency, a news provider, a print medium, and a website for the financial markets (jointly known as a media bundle). In that regard, at
least one of those media must allow an active dissemination throughout Europe. In addition, the issuer must promptly, though not prior to publication, transmit a copy of the notice to the company
register (Unternehmensregister). At the same time, the issuer must notify the German Federal Financial Supervisory Authority of the publication.

The
German Securities Trading Act also contains various provisions designed to ensure that shareholdings in listed companies are attributed to the person who actually controls the voting
rights associated with such shares.

Failure
by a shareholder to give a required notice results, for the duration of the failure, in the loss of the voting rights from the shares that belong to such shareholder or from
shares whose voting rights are attributable to it. Dividend rights are not affected if the failure to give notice was not willful and such failure has been remedied on or before the date of the annual
meeting at which the dividend is approved. In certain cases involving a willful or grossly negligent breach of the notification obligations, the loss of rights will continue for an additional six
months. In addition, a fine may be imposed for failure to comply with the notice requirement.

Once
a party's voting rights from shares in a German issuer meet or exceed the 10% threshold or a higher threshold, such party must notify the issuer, within twenty trading days, of its
intentions with respect to the acquisition of the voting rights, identify the source of the funds used to make the acquisition and, in the process, make other required disclosures.

Basis of Potential Claims

Claims against members of our supervisory board or board of management may be asserted on behalf of Daimler 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 at which the resolution was passed.

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 1% 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 could have become 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 German Stock Corporation Act (Aktiengesetz) requires a

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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
and why not. Shareholders must be given permanent access to such declaration. Our supervisory board and board of management issued a statement declaring that we have complied, do comply and
intend to comply in the future with the recommendations of the Corporate Governance Code, subject to the exceptions and for the reasons identified in the
declaration. We have filed an English translation of the declaration as an exhibit to this annual report and also made it available on our website at http://www.daimler.com/dccom/0-5-58949-1-58937-1-0-0-0-0-0-8-7145-0-0-0-0-0-0-0.html.

MATERIAL CONTRACTS

In May 2007, DaimlerChrysler AG, DaimlerChrysler North America Finance Corporation, DaimlerChrysler Holding Corporation and a
subsidiary of the private-equity firm Cerberus Capital Management L.P. (Cerberus) entered into a Contribution Agreement pursuant to which a majority interest in the Chrysler Group and the
related Chrysler financial services business in the NAFTA region (the Chrysler activities) was acquired by a subsidiary of Cerberus. The agreement provided for Cerberus to make a capital contribution
of €5.2 billion (US$7.2 billion) in return for an 80.1% equity interest in Chrysler Holding LLC, a newly established holding company for the Chrysler activities.
We retained a 19.9% non-controlling equity interest in Chrysler Holding LLC. The transaction closed on August 3, 2007.

In
connection with the Cerberus transaction, our subsidiary DaimlerChrysler North America Finance Corporation agreed pursuant to the Second Lien Term Loan Agreement, dated as of
August 3, 2007, among Carco Intermediate Holdco II, LLC, Chrysler LLC, the several banks and other financial institutions or entities from time to time party thereto, JP Morgan
Chase Bank, N.A., as administrative agent and the other agents party thereto, to provide a second lien loan of up to US$1.5 billion. This loan was drawn in 2008.

In
June 2009, based on a binding term sheet signed in April 2009, we entered into a redemption agreement regarding our remaining 19.9% non-controlling equity interest in
Chrysler Holding LLC. As a result of the redemption, Daimler no longer holds any equity interest in Chrysler Holding LLC or its subsidiaries and all our representatives resigned from the
boards of Chrysler Holding LLC and its subsidiaries. The binding term sheet also provided for a settlement agreement, which was signed later in June 2009, covering among others things the
forgiveness of the Group's receivables, including accrued interest, in connection with a subordinated loan and the above-mentioned second lien loan and the release of certain claims previously made by
Cerberus against Daimler. In addition, pursuant to the settlement agreement, Daimler's US$1 billion guarantee of Chrysler pension plans, provided to the U.S. Pension Benefit Guaranty
Corporation in 2007 in connection with the Cerberus transaction, was cancelled, and Daimler paid US$200 million into the Chrysler pension plans in June 2009, agreed to make further payments of
US$200 million in each of 2010 and 2011 and provided a replacement guarantee of US$200 million which will remain in place until August 2012. The nominal amounts of the forgiven
receivables, which were fully impaired at December 31, 2008, were US$0.4 billion and US$1.5 billion, respectively. However, the forgiveness of the US$1.5 billion second
lien loan by Daimler was subject to the condition that the official committee of unsecured creditors of Chrysler, formed as part of Chrysler's bankruptcy proceedings, would not commence litigation
against Daimler. In the third quarter of 2009, the committee filed a complaint with the bankruptcy court which is primarily related to transactions undertaken in connection with the acquisition by
Cerberus of its majority interest in Chrysler in 2007. As a consequence, the forgiveness of the US$1.5 billion second lien loan did not become effective.

For
additional information on the Chrysler transactions, please refer to Note 2 to our Consolidated Financial Statements and the discussions under "Introduction" in
"Item 4. Information on the Company" and "Operating Results" in "Item 5. Operating and Financial Review and Prospects." For additional information on the lawsuit brought by the Official
Committee of Unsecured Creditors of Old CarCo LLC (formerly known as Chrysler LLC), please refer to the discussion under the heading "Legal Proceedings" in "Item 8. Financial
Information" and to Note 27 to our Consolidated Financial Statements.

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In
March 2009, Daimler AG, Aabar Investments PJSC of Abu Dhabi and Semare Beteiligungsverwaltungs GmbH, an indirect wholly-owned subsidiary of Aabar, entered into an Investment
Agreement pursuant to which Semare agreed to subscribe to 96,408,000 newly issued ordinary shares, no par value, of Daimler AG at an issue price of €20.27 per share or
€1,954,190,160 in the aggregate. Following the closing of the transaction on March 24, 2009, Aabar reported that it and some of its affiliates beneficially held 9.4% of the
outstanding ordinary shares of
Daimler AG. Please also refer to the discussion under the heading "Major Shareholders" under "Item 7. Major Shareholders and Related Party Transactions."

Concurrently
with Aabar's investment in Daimler AG, Daimler AG and International Petroleum Investment Company (IPIC), an entity owned by the Government of the Emirate of Abu Dhabi which
in turn controls the majority of the board of directors of Aabar, identified areas of future strategic cooperation, including projects relating to electric automobiles with a particular focus on
projects aiming at the reduction of CO2 emissions, projects with respect to the development and/or production of innovative compound materials to be used in automobiles, and possible joint investment
proposals relating to each. In addition, IPIC and Abu Dhabi acknowledged the special importance of Daimler's willingness to support corporate and social responsibility projects in Abu Dhabi.

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, paying dividends or making 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 employee
stock options 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, traders in securities that elect a mark-to-market method of accounting for securities holdings, insurance companies,
tax-exempt organizations, broker dealers and corporations that own

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10%
or more of our ordinary shares). This discussion does not address the tax consequences to any person who owns an interest in a partnership or any other pass-through entity that holds
Daimler ordinary shares. The discussion also does not address the consequences of the alternative minimum tax to any person or 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. To the extent the following discussion relates to withholding tax, refund procedures and other matters
regarding dividends, the discussion is intended as a general guideline and should not be interpreted to mean that dividends will be paid for any particular period.

Withholding Tax on Dividends

Effective as of January 1, 2009, the withholding tax rate on dividends paid by a German corporation to non-resident
stockholders has been increased from a total rate of 21.1% (consisting of a 20% withholding tax and an effective 1.1% surcharge) to a total effective rate of 26.375% (consisting of a 25% withholding
tax and an effective 1.375% surcharge). Following that change, Daimler AG will be required to withhold German tax on dividends paid to non-resident stockholders in 2010 at a total
effective rate of 26.375%. U.S. shareholders can obtain a partial refund of this 26.375% 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 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 rules governing the foreign tax credit
are complex and U.S. shareholders are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.

The
Income Tax Treaty reduces the German withholding tax rate from 26.375% to 15% of the gross amount of any dividend you receive from a German corporation. Therefore, you may apply for
a refund of German withholding tax in an amount equal to 11.375% of the gross amount of the dividend you received (26.375% aggregate German withholding tax rate minus 15% Income Tax Treaty withholding
tax rate).

Thus,
as an example, each US$1,000 of gross dividend paid to you will be subject to a German withholding tax of US$263.75, of which US$113.75 may be refunded to you under the Income Tax
Treaty. Assuming you receive the US$113.75 refund, you will receive in total US$850 of cash for each US$1,000 of gross dividend (US$736.25 directly and US$113.75 by way of withholding tax refund). The
United States federal income tax rules will treat you as if you received a total dividend of US$1,000, and you will have to include US$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 US$150 of German withholding tax.

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

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Withholding Tax Refund Procedures



If you are a record holder of our ordinary shares who is registered in our share register, our U.S. transfer agent, The Bank of New
York, will initially receive any dividends you are entitled to 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 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. Your refund claim request must 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.

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. A user fee is charged by the IRS to process Form 8802. The user fee is US$35 for a request for up to twenty original
Forms 6166 issued under a single taxpayer identification number ("TIN"). Additional user fees apply to additional requests for Form 6166 under the same TIN or requests for
Form 6166

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under
a different TIN. The user fee must be in the form of a check, money order or electronic payment payable in U.S. dollars to the United States Treasury.

If
you choose to submit the user fee in the form of a check or money order, you must send the completed Form 8802, all required statements and documentation and the appropriate
user fee to the Internal Revenue Service, P.O. Box 71052, Philadelphia, PA 19176-6052, USA, or by private delivery service to Citibank, Attn: IRS Lockbox Operations, 500
White Clay Center Drive, Building 500, Newark, DE 19711. If you choose to submit the user fee by electronic payment, you must send the completed Form 8802 and all required statements and
documentation to the Internal Revenue Service, P.O. Box 16347, Philadelphia, PA 19114-0447. The Certification requests are generally processed within 45 days from the
date received. Form 8802 and the related instructions can be found on the IRS website athttp://www.irs.gov.

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 before January 1, 2011. Qualified dividend income generally includes dividends paid by United States corporations and
qualified foreign corporations. A foreign corporation generally will be treated as a qualified foreign corporation for these purposes if:



We
believe we are treated as a qualified foreign corporation under either of these tests.

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.

Form 1099-DIV
for 2009 will report the gross amount of Daimler qualified dividends in Box 1b. 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 Daimler dividend.

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.

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
Daimler ordinary shares.

If
you sell or otherwise dispose of your Daimler 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 Daimler ordinary shares more than 12 months, the capital gain will generally be
subject to a maximum United States federal income tax rate of 15%.

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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 United States Securities and Exchange Commission (SEC),
including this annual report and the exhibits thereto, at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may also obtain copies of these materials by mail
from the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates. You may obtain information on the operation of the SEC's Public Reference Room by
calling the SEC 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 SEC
electronically through the SEC's website at www.sec.gov. In addition, you may inspect materials we file at the offices of the New York Stock Exchange at 20 Broad Street, New York, New York 10005.

Item 11. Quantitative and Qualitative Disclosures About Market Risk.

The global nature of our businesses exposes us to market risks resulting from changes in foreign currency exchange rates and interest
rates. Accordingly, changes in foreign currency exchange rates and interest rates may adversely affect our operating results and financial condition.

We
are also exposed to commodity price risk associated with our business operations. In addition, we are exposed to equity price risk. Our equity price risk assessment does not include
non-controlling equity interests we hold in other companies, which we classify as long-term investments. The equity price risk of the remaining positions is not material to us.

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.

For
a detailed description of our risk management control systems and information about our exchange rate risk, interest rate risk as well as our equity price risk and commodity price
risk, please refer to the discussion under the sub-heading "Finance Market Risks" in Note 30 to our Consolidated Financial Statements. Any market sensitive instruments, including
equity and interest bearing securities that our pension and other post-employment benefit plans hold are not included in the quantitative or qualitative analyses presented in
Note 30. Please refer to Note 21 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 Notes 1 and 29 to our Consolidated Financial Statements.

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/Daimler Financial Services, has evaluated, as of December 31, 2009, the effectiveness of 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, as amended. Based on such evaluation, the chairman of
our board of management and the member of the board of management responsible for Finance & Controlling/Daimler Financial Services have concluded that, as of December 31, 2009, our
disclosure controls and procedures are effective to achieve their intended objectives.

Management's annual report on internal control over financial reporting.The management of Daimler is responsible for establishing and
maintaining
adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange
Act of 1934, as amended, as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles and includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a
material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods
are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Daimler's
management assessed the effectiveness of the company's internal control over financial reporting as of December 31, 2009. In making this assessment, management used the
criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in "Internal Control  Integrated Framework."

Based
on its assessment, management believes that, as of December 31, 2009, the company's internal control over financial reporting is effective.

KPMG
AG Wirtschaftsprüfungsgesellschaft, the independent registered public accounting firm that has audited our Consolidated Financial Statements, has issued an
attestation report on the company's internal control over financial reporting as of December 31, 2009. This attestation report appears on page F-3.

Changes in internal control over financial reporting.During the period covered by this report, there have not been any changes in
Daimler AG's
internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) that have
materially affected, or are reasonably likely to materially affect, Daimler AG's internal control over financial reporting.

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Item 16A. Audit Committee Financial Expert.

Our supervisory board has made the formal determination that Bernhard Walter and Clemens Börsig are "audit committee
financial experts" as that term is defined by SEC rules, and that they are "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 member responsible 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 http://www.daimler.com/dccom/0-5-168351-1-168355-1-0-0-0-0-0-36-7155-0-0-0-0-0-0-0.html.

Item 16C. Principal Accountant Fees and Services.

At the annual meeting held on April 8, 2009, our shareholders appointed KPMG AG Wirtschaftsprüfungsgesellschaft
(KPMG AG), to serve as our independent auditor for the 2009 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 AG and other independent member firms within the international
KPMG network for each of the last two fiscal years.

Year Ended December 31,2009

2008(€ in millions)Audit Fees


44


50Audit-Related Fees


2


2Tax Fees





1All Other Fees


1


2Total


47


55


"Audit
Fees" are the aggregate fees billed or expected to be billed for the audit of our consolidated and annual financial statements, the audit of internal control over financial
reporting, 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 as well as advisory services associated with our 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 transactions and tax consulting
associated with international transfer prices.

"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

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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 2009 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 semiannual 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 Daimler 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 our audit committee to act independently.

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

In 2009, we did not repurchase any of our ordinary shares, including under a share buy-back program.

At
the annual general meeting held on April 9, 2008, our shareholders authorized us, until October 9, 2009, to repurchase ordinary shares up to 10% of our share capital as
of April 9, 2008. Pursuant to this authorization, the board of management decided, with the approval of the supervisory board, to conduct a further share buy-back program of up to 10% of the
share capital for a maximum consideration of €6 billion, which we announced on June 17, 2008. At December 31, 2008, Daimler AG had repurchased 37,283,831 shares
for an aggregate consideration of €1.45 billion under that program. The repurchased shares, which we continue to hold as treasury shares, represented 3.87% of the shares
outstanding as of April 9, 2008. As a result of the uncertainty in the automotive markets in the second half of 2008, we suspended the further execution of that buy-back program on
October 24, 2008 and did not reinstate the program before the related shareholder authorization expired on October 9, 2009. For additional information regarding our share buy-back
programs, please refer to Note 19 to our Consolidated Financial Statements.

We
also did not effect any purchases of ordinary shares in 2009 in connection with our employee stock purchase program. However, in connection with a stock ownership program established
for the benefit of Group employees in the United Kingdom, a fund owned by Daimler UK Share Trustee Ltd., a trust established by our UK distributor, purchased 4,666 ordinary shares of Daimler AG
ordinary shares at an average price per share of GBP25.30. An independent fiduciary administers the fund.

In
addition, in 2009, some of our sponsored pension and other post-employment benefit plans purchased 3,316,388 certificates on Daimler AG ordinary shares at an average price
per unit of 22.46 and 100,634 Daimler AG ordinary shares at an average price per share of €24.49.

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Item 16F. Change in Registrant's Certifying Accountant.

Not applicable.

Item 16G. Corporate Governance.

Our corporate governance practices generally derive from the provisions of the German Stock Corporation Act
(Aktiengesetz), the German Co-determination Act (Mitbestimmungsgesetz), and the German
Corporate Governance Code (Deutscher Corporate Governance Kodex) adopted by the Government Commission on the German Corporate Governance Code. These
standards differ in some respects from the corporate governance practices followed by U.S. companies under the listing standards of the New York Stock Exchange (NYSE). A summary of the principal
differences follows.

Two-Tier Board

Like all German stock corporations (Aktiengesellschaften), Daimler AG has three
corporate bodies  the general meeting of shareholders, the board of management (Vorstand) and the supervisory board
(Aufsichtsrat). The German Stock Corporation Act requires a clear separation of management and oversight functions and therefore prohibits simultaneous
membership on both boards. Members of the board of management and the supervisory board must exercise the standard of care of a prudent and diligent business person when carrying out their duties. In
complying with this standard of care, members of both boards must take into account the interests of the company, including the interests of its shareholders and employees and, to some extent, the
common interest.

Our
board of management is responsible for managing our business and representing Daimler AG in its dealings with third parties. The board of management's functions are comparable to
those performed in the ordinary course of business by the senior executive officers of a U.S. company. However, the members of the board of management, including its chairman, are regarded as peers
and share a collective responsibility for all management decisions.

The
supervisory board oversees our board of management and appoints and removes its members. Members of the supervisory board cannot be involved in the day-to-day
management of our business. Pursuant to German law requirements, however, our supervisory board has specified matters requiring its approval. Matters requiring such approval include decisions and
actions which would fundamentally change the company's assets, financial position or results of operations.

According
to the German Co-determination Act, the supervisory board of the company consists of twenty members, who are equally divided between shareholder representatives and
labor representatives. The chairman of the supervisory board is a representative of the shareholders. In the event of a deadlock, passing a resolution requires another vote and, in the case of a
second deadlock, the chairman of the supervisory board casts the deciding vote.

Independence

Unlike the NYSE listing standards, German law does not require the supervisory board to have a majority of independent directors nor
does it provide for an affirmative independence determination. If the supervisory board of a German stock corporation has established an audit committee, however, German law requires, since May 2009,
that at least one member of the audit committee be independent and have financial expertise. In addition, the members of our audit committee must meet the independence requirements of
Rule 10A-3 under the Securities Exchange Act of 1934. There are also several other rules under German law directed at the independence of supervisory board members. In addition to
prohibiting members of the board of management from serving on the supervisory board, German law prohibits former members of the board of management of a listed company, effective as of August 2009,
to serve on the supervisory board during the two years immediately following termination of their membership on the board of management, unless at least 25% of the outstanding

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shareholder
voting rights propose the former board of management member for election to the supervisory board. German law further requires members of the supervisory board to act in the best interest
of the company. They are also not bound by directions or instructions from third parties. Moreover, according to German law, consulting or other service agreements between a German stock corporation
and any of its supervisory board members must be approved by the supervisory board.

The
German Corporate Governance Code contains additional corporate governance rules directed at the independence of supervisory board members. The Code recommends that the supervisory
board includes an adequate number of independent members. The rules of procedure of our supervisory board implement this recommendation by providing that more than half of the shareholder
representatives on the supervisory board should be independent. The Code also suggests that the head of the audit committee be independent, and the rules of procedure of our audit committee reflect
that suggestion. Moreover, in accordance with the Code, our supervisory board takes into account potential conflicts of interest when nominating candidates for election to the supervisory board as
shareholder representatives. If a significant conflict of interest that is more than
temporary arises during the term of a member of our supervisory board, the rules of procedure of our supervisory board require such member to resign. Contrary to the requirements of the NYSE listing
standards, the supervisory board is not required to meet at regularly scheduled executive sessions without the board of management attending. The supervisory board meets without members of the board
of management attending, however, if necessary or at the supervisory board's election.

In
an effort to introduce a broader range of experiences and expertise and a greater degree of independence, consistent with the German Corporate Governance Code, the articles of
incorporation of Daimler AG provide that no more than two former members of our board of management may be members of the supervisory board at any given time. In addition, no individual holding an
executive position or advisory role in a major competitor may be a member of our supervisory board, and no member of our supervisory board may hold more than three other supervisory board positions in
listed companies outside the Group, if he or she is also a member of the board of management of a listed company.

Supervisory Board Committees

German stock corporations that are subject to the German Co-determination Act are required to establish a mediation
committee (Vermittlungsausschuss). The charge of the mediation committee is to resolve any impasse among the members of the supervisory board in the
event the supervisory board is unable to achieve the two-thirds supermajority vote of its members required to appoint or dismiss a member of the board of management.

In
addition to the mediation committee, we have an audit committee (Prüfungsausschuss) which handles the formal engagement
of the company's independent auditor once the auditor has been elected by the annual meeting of shareholders. Our audit committee also addresses issues of accounting, risk management, internal
control, internal audit, compliance and auditor independence.

The
presidential committee (Präsidialausschuss) prepares and recommends to the supervisory board for resolution the
compensation structure and individual compensation packages for the members of our board of management. The presidential committee also makes recommendations regarding the individual performance
target achievement of our board of management members. In addition, the committee handles all matters unrelated to compensation that involve the service contracts and other contractual arrangements
with our board of management members. Since August 2009, German law requires that not only the overall compensation structure for the board of management but also the individual compensation of each
of its members be determined by the full supervisory board and not be delegated to a committee.

Finally,
our supervisory board established a nomination committee (Nominierungsausschuss) as recommended by the German Corporate
Governance Code. The nomination committee, which consists exclusively of shareholder representatives of the supervisory board, recommends candidates as future shareholder representatives to the
supervisory board for approval by the shareholders.

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Shareholder
representatives and members of the supervisory board elected by employees are equally represented on the mediation committee, the presidential committee and the audit
committee.

Further Information

For additional information regarding our boards, including the audit and other committees of our supervisory board, please refer to the
discussion in "Item 6. Directors, Senior Management and Employees." For further information regarding our corporate governance in general, including compliance with the German Corporate
Governance Code, please refer to the discussion under the heading "Articles of Incorporation" in "Item 10. Additional Information". For further information regarding our code of ethics, please
refer to the discussion under "Item 16B. Code of Ethics".

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PART III

Item 17. Financial Statements.

Not applicable.

Item 18. Financial Statements.

You can find our Consolidated Financial Statements on pages F1 through F-98.

Item 19. Exhibits.

We have filed the following documents as exhibits to this annual report:

1.1

Articles of Incorporation (Satzung) of Daimler AG as amended to date.2.1

The total amount of long-term debt securities of Daimler 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 Daimler AG or of its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed.4.1

The following agreements (without exhibits and schedules):Contribution Agreement, dated May 14, 2007, among DaimlerChrysler AG, DaimlerChrysler North America Finance Corporation, DaimlerChrysler Holding Corporation and CG Investor, LLC (filed as an Exhibit to Daimler
AG's Annual Report on Form 20-F for the year ended December 31, 2007 and incorporated herein by reference); Second Lien Term Loan Agreement, dated as of August 3, 2007, among Carco Intermediate Holdco II, LLC, Chrysler LLC,
the several banks and other financial institutions or entities from time to time party thereto, JPMorgan Chase Bank, N.A., as administrative agent and the other agents party thereto, First Omnibus Amendment, dated as of September 28, 2007, to,
among others, Second Lien Credit Arrangement, and Second Amendment, dated as of November 29, 2007, to Second Lien Credit Agreement (filed as an Exhibit to Daimler AG's Annual Report on Form 20-F for the year ended December 31, 2007 and
incorporated herein by reference); Redemption Agreement, dated as of June 3, 2009, by and among Daimler North America Finance Corporation (formerly known as DaimlerChrysler North America Finance Corporation), Daimler Investments U.S. Corporation
(formerly known as DaimlerChrysler Holding Corporation), Chrysler Holding LLC, CG Investment Group, LLC, CG Investment Group II, LLC, Chrysler Holding Management LLC, FinCo Management LLC, and CarCo Management LLC;
Settlement Agreement III, dated as of June 5, 2009, by and among Daimler North America Finance Corporation (formerly known as DaimlerChrysler North America Finance Corporation), Daimler Investments U.S. Corporation (formerly known as
DaimlerChrysler Holding Corporation), Daimler AG (formerly known as DaimlerChrysler AG), CG Investment Group, LLC, CG Investor, LLC, Chrysler Holding LLC, CarCo Immediate HoldCo I LLC, Chrysler LLC, and the Pension Benefit
Guaranty Corporation; Investment Agreement, dated March 22, 2009, among Daimler AG, Semare Beteiligungsverwaltungs GmbH and Aabar Investments PJSC.7.

Ratios of Earnings to Fixed Charges.8.1

List of subsidiaries.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, Finance & Controlling/Daimler 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.15.1

Declaration by the Board of Management and Supervisory Board of Daimler AG pursuant to §161 Joint Stock Corporation Act (AktG) regarding the German Corporate Governance Code as amended on June 18, 2009 with
effect as of August 5, 2009.


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SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly
caused and authorized the undersigned to sign this annual report on its behalf.

Date:
March 3, 2010

DAIMLER AGBy:

/s/ DIETER ZETSCHE Dr. Dieter Zetsche
Chairman of the Board of Management/Head of Mercedes-Benz CarsBy:

/s/ BODO UEBBER Bodo Uebber
Member of the Board of Management Finance & Controlling/Daimler Financial Services


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DAIMLER AG

Index to Consolidated Financial Statements

PageReports of Independent Registered Public Accounting Firm

F-2Consolidated Financial Statements:Consolidated Statement of Income (Loss) for the years ended December 31, 2009, 2008 and 2007

F-4Consolidated Statement of Comprehensive Income (Loss) for the years ended December 31, 2009, 2008 and 2007

F-5Consolidated Statement of Financial Position at December 31, 2009 and 2008

F-6Consolidated Statement of Changes in Equity for the years ended December 31, 2009, 2008 and 2007

F-7Consolidated Statement of Cash Flows for the years ended December 31, 2009, 2008 and 2007

F-8Notes to the Consolidated Financial Statements

F-10


F-1

---





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The
Supervisory Board
Daimler AG:

We
have audited the accompanying consolidated statements of financial position of Daimler AG and subsidiaries ("Daimler") as of December 31, 2009 and 2008, and the related
consolidated statements of income (loss), changes in equity, comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2009.
These consolidated financial statements are the responsibility of Daimler'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 Daimler as of December 31, 2009 and
2008, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2009, in conformity with International Financial
Reporting Standards, as issued by the International Accounting Standards Board.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Daimler's internal control over financial reporting as of
December 31, 2009, based on criteria established in Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO),
and our report dated March 1, 2010 expressed an unqualified opinion on the effectiveness of Daimler's internal control over financial reporting.

KPMG AG Wirtschaftsprüfungsgesellschaft


Stuttgart,
Germany
March 1, 2010

F-2

---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The
Supervisory Board
Daimler AG:

We
have audited Daimler AG's and subsidiaries' ("Daimler") internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control
 Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Daimler's management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We
conducted our audit 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 effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
our opinion, Daimler maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established in
Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of financial position of Daimler AG
and subsidiaries ("Daimler") as of December 31, 2009 and 2008, and the related consolidated statements of income (loss), changes in equity, comprehensive income (loss), and cash flows for each
of the years in the three-year period ended December 31, 2009, and our report dated March 1, 2010 expressed an unqualified opinion on those consolidated financial statements.

KPMG AG Wirtschaftsprüfungsgesellschaft


Stuttgart,
Germany
March 1, 2010

F-3

---





DAIMLER AG AND SUBSIDIARIES
Consolidated Statement of Income (Loss)

Consolidated

Industrial Business
(unaudited additional information)

Daimler Financial Services
(unaudited additional information)Year ended December 31,

Year ended December 31,

Year ended December 31,in millions of €

Note

2009

2008

2007

2009

2008

2007

2009

2008

2007Revenue


3


78,924


98,469


101,569


66,928


86,505


90,602


11,996


11,964


10,967Cost of sales


4


(65,567
)

(76,910
)

(77,574
)

(54,268
)

(66,396
)

(68,082
)

(11,299
)

(10,514
)

(9,492
)Gross profit





13,357


21,559


23,995


12,660


20,109


22,520


697


1,450


1,475Selling expenses


4


(7,608
)

(9,204
)

(8,956
)

(7,303
)

(8,887
)

(8,643
)

(305
)

(317
)

(313
)General administrative expenses


4


(3,287
)

(4,124
)

(4,023
)

(2,838
)

(3,608
)

(3,492
)

(449
)

(516
)

(531
)Research and non-capitalized development costs


4


(2,896
)

(3,055
)

(3,158
)

(2,896
)

(3,055
)

(3,158
)







Other operating income


5


693


1,234


741


589


1,181


701


104


53


40Other operating expense


5


(503
)

(454
)

(714
)

(460
)

(432
)

(666
)

(43
)

(22
)

(48
)Share of profit (loss) from investments accounted for using the equity method, net


12


72


(998
)

1,053


65


(1,029
)

1,051


7


31


2Other financial income (expense), net


6


(1,341
)

(2,228
)

(228
)

(1,339
)

(2,226
)

(233
)

(2
)

(2
)

5Earnings before interest and taxes (EBIT)1





(1,513
)

2,730


8,710


(1,522
)

2,053


8,080


9


677


630Interest income (expense), net


7


(785
)

65


471


(775
)

76


482


(10
)

(11
)

(11
)Profit (loss) before income taxes





(2,298
)

2,795


9,181


(2,297
)

2,129


8,562


(1
)

666


619Income tax expense (benefit)


8


(346
)

(1,091
)

(4,326
)

(350
)

(882
)

(4,101
)

4


(209
)

(225
)Net profit (loss) from continuing operations





(2,644
)

1,704


4,855


(2,647
)

1,247


4,461


3


457


394Net profit (loss) from discontinued operations


2





(290
)

(870
)




(290
)

(1,850
)







980Net profit (loss)





(2,644
)

1,414


3,985


(2,647
)

957


2,611


3


457


1,374Minority interest





4


(66
)

(6
)Profit (loss) attributable to shareholders of Daimler AG





(2,640
)

1,348


3,979Earnings (loss) per share (in €) for profit attributable to shareholders of Daimler AG


33BasicNet profit (loss) from continuing operations





(2.63
)

1.71


4.67Net profit (loss) from discontinued operations








(0.30
)

(0.84
)Net profit (loss)





(2.63
)

1.41


3.83DilutedNet profit (loss) from continuing operations





(2.63
)

1.70


4.63Net profit (loss) from discontinued operations








(0.30
)

(0.83
)Net profit (loss)





(2.63
)

1.40


3.80


The accompanying notes are an integral part of these consolidated financial statements.

F-4

---



DAIMLER AG AND SUBSIDIARIES
Consolidated Statement of Comprehensive Income (Loss)1

Consolidatedin millions of €

2009

2008

2007Net profit (loss)


(2,644
)

1,414


3,985Unrealized gains (losses) from currency translation adjustments


267


(32
)

(790
)Unrealized gains (losses) from financial assets available for sale


247


(274
)

(83
)Unrealized gains (losses) from derivative financial instruments


(308
)

(54
)

505Unrealized gains (losses) from investments accounted for using the equity method


195


(412
)

(425
)Other comprehensive income (loss), net of taxes


401


(772
)

(793
)Thereof minority interest


103


(31
)

69Thereof profit (loss) attributable to shareholders of Daimler AG


298


(741
)

(862
)Total comprehensive income (loss)


(2,243
)

642


3,192Thereof minority interest


99


35


75Thereof profit (loss) attributable to shareholders of Daimler AG


(2,342
)

607


3,117


The accompanying notes are an integral part of these consolidated financial statements.

F-5

---





DAIMLER AG AND SUBSIDIARIES
Consolidated Statement of Financial Position

Consolidated

Industrial Business
(unaudited additional information)

Daimler Financial Services
(unaudited additional information)At December 31,

At December 31,

At December 31,in millions of €

Note

2009

2008

2009

2008

2009

2008AssetsIntangible assets


9


6,753


6,113


6,690


6,040


63


73Property, plant and equipment


10


15,965


16,087


15,911


16,022


54


65Equipment on operating leases


11


18,532


18,672


8,651


7,185


9,881


11,487Investments accounted for using the equity method


12


4,295


4,249


4,241


4,188


54


61Receivables from financial services


13


22,250


25,003


(24
)

(302
)

22,274


25,305Other financial assets


14


4,017


3,278


2,719


3,060


1,298


218Deferred tax assets


8


2,233


2,828


1,830


2,544


403


284Other assets


15


496


606


305


454


191


152Total non-current assets





74,541


76,836


40,323


39,191


34,218


37,645Inventories


16


12,845


16,805


12,337


16,244


508


561Trade receivables


17


5,285


6,999


5,073


6,793


212


206Receivables from financial services


13


16,228


17,384


(37
)

(67
)

16,265


17,451Cash and cash equivalents





9,800


6,912


6,735


4,664


3,065


2,248Other financial assets


14


7,460


4,718


676


(2,489
)

6,784


7,207Other assets


15


2,352


2,571


(1,346
)

181


3,698


2,390Sub-total current assets





53,970


55,389


23,438


25,326


30,532


30,063Assets held for sale from non-automotive leasing portfolios


18


310











310


Total current assets





54,280


55,389


23,438


25,326


30,842


30,063Total assets





128,821


132,225


63,761


64,517


65,060


67,708Equity and liabilitiesShare capital





3,045


2,768Capital reserves





11,864


10,204Retained earnings





16,163


19,359Other reserves





632


334Treasury shares





(1,443
)

(1,443
)Equity attributable to shareholders of Daimler AG





30,261


31,222Minority interest





1,566


1,508Total equity


19


31,827


32,730


27,157


28,098


4,670


4,632Provisions for pensions and similar obligations


21


4,082


4,140


3,901


3,969


181


171Provisions for income taxes





2,774


1,582


2,772


1,579


2


3Provisions for other risks


22


4,696


4,910


4,585


4,801


111


109Financing liabilities


23


33,258


31,209


13,390


10,505


19,868


20,704Other financial liabilities


24


2,148


1,942


1,985


1,846


163


96Deferred tax liabilities


8


509


1,725


(2,987
)

(3,171
)

3,496


4,896Deferred income





1,914


1,728


1,305


1,210


609


518Other liabilities


25


75


77


66


78


9


(1
)Total non-current liabilities





49,456


47,313


25,017


20,817


24,439


26,496Trade payables





5,622


6,478


5,422


6,268


200


210Provisions for income taxes





509


774


75


39


434


735Provisions for other risks


22


6,311


6,830


6,070


6,647


241


183Financing liabilities


23


25,036


27,428


(7,874
)

(6,057
)

32,910


33,485Other financial liabilities


24


7,589


8,376


6,280


7,193


1,309


1,183Deferred income





1,397


1,239


755


573


642


666Other liabilities


25


1,074


1,057


859


939


215


118Total current liabilities





47,538


52,182


11,587


15,602


35,951


36,580Total equity and liabilities





128,821


132,225


63,761


64,517


65,060


67,708


The accompanying notes are an integral part of these consolidated financial statements.

F-6

---





DAIMLER AG AND SUBSIDIARIES
Consolidated Statement of Changes in Equity1

Other reservesin millions of €

Share
capital

Capital
reserves

Retained
earnings

Currency
translation
adjustment

Financial
assets
available-
for-sale

Derivative
financial
instruments

Share of
investments
accounted
for using
the equity
method

Treasury
shares

Equity
attributable
to share-
holders of
Daimler AG

Minority
interest

Total
equityBalance at January 1, 2007


2,673


8,613


23,702


366


377


125


1,069





36,925


421


37,346Net profit








3,979

















3,979


6


3,985Unrealized gains (losses)











(778
)

(96
)

682


(820
)




(1,012
)

68


(944
)Deferred taxes on unrealized gains (losses)














15


(177
)

312





150


1


151Total comprehensive income (loss)








3,979


(778
)

(81
)

505


(508
)




3,117


75


3,192Dividends








(1,542
)
















(1,542
)

(37
)

(1,579
)Share-based payment





36




















36





36Issue of new shares


93


1,549




















1,642


14


1,656Acquisition of treasury shares























(3,510
)

(3,510
)




(3,510
)Issue of treasury shares























27


27





27Retirement of own shares








(3,483
)













3,483








Other





23




















23


1,039


1,062Balance at December 31, 2007


2,766


10,221


22,656


(412
)

296


630


561





36,718


1,512


38,230Net profit








1,348

















1,348


66


1,414Unrealized losses











(75
)

(285
)

(69
)

(513
)




(942
)

(70
)

(1,012
)Deferred taxes on unrealized losses














12


15


174





201


39


240Total comprehensive income (loss)








1,348


(75
)

(273
)

(54
)

(339
)




607


35


642Dividends








(1,928
)
















(1,928
)

(92
)

(2,020
)Share-based payment





(43
)



















(43
)




(43
)Issue of new shares


2


17




















19


18


37Acquisition of treasury shares























(4,218
)

(4,218
)




(4,218
)Issue of treasury shares























58


58





58Retirement of own shares








(2,717
)













2,717








Other





9




















9


35


44Balance at December 31, 2008


2,768


10,204


19,359


(487
)

23


576


222


(1,443
)

31,222


1,508


32,730Net loss








(2,640
)
















(2,640
)

(4
)

(2,644
)Unrealized gains (losses)











274


255


(431
)

102





200


141


341Deferred taxes on unrealized gains (losses)














(8
)

123


(17
)




98


(38
)

60Total comprehensive income (loss)








(2,640
)

274


247


(308
)

85





(2,342
)

99


(2,243
)Dividends








(556
)
















(556
)

(101
)

(657
)Share-based payment





1




















1





1Issue of new shares


277


1,676




















1,953





1,953Other





(17
)



















(17
)

60


43Balance at December 31, 2009


3,045


11,864


16,163


(213
)

270


268


307


(1,443
)

30,261


1,566


31,827


The accompanying notes are an integral part of these consolidated financial statements.

F-7

---





DAIMLER AG AND SUBSIDIARIES
Consolidated Statement of Cash Flows1

Consolidatedin millions of €

2009

2008

2007Net profit (loss) adjusted for


(2,644
)

1,414


3,985Depreciation and amortization


3,264


3,023


4,146Other non-cash expense and income


(563
)

2,438


3,514(Gains) losses on disposals of assets


(34
)

(720
)

(1,307
)Change in operating assets and liabilities Inventories


4,232


(2,717
)

(1,751
) Trade receivables


1,795


(527
)

215 Trade payables


(902
)

(644
)

208 Receivables from financial services


3,148


(2,453
)

831 Vehicles on operating leases


1,766


37


(3,395
) Other operating assets and liabilities


899


(637
)

700Cash provided by (used for) operating activities


10,961


(786
)

7,146Additions to property, plant and equipment


(2,423
)

(3,559
)

(4,247
)Additions to intangible assets


(1,422
)

(1,619
)

(1,354
)Proceeds from disposals of property, plant and equipment and intangible assets


280


1,501


1,297Investments in businesses


(141
)

(906
)

(159
)Proceeds from disposals of businesses


67


515


3,799Cash flow related to the transfer of the Chrysler activities








22,594Acquisition of securities (other than trading)


(17,782
)

(10,134
)

(15,030
)Proceeds from sales of securities (other than trading)


12,407


10,341


19,617Change in other cash


64


(951
)

(38
)Cash provided by (used for) investing activities


(8,950
)

(4,812
)

26,479Change in short-term financing liabilities


(2,332
)

1,525


(9,763
)Additions to long-term financing liabilities


24,900


28,825


16,195Repayment of long-term financing liabilities


(22,807
)

(27,122
)

(28,230
)Dividends paid


(657
)

(2,020
)

(1,579
)Proceeds from issuance of share capital (including minority interest)


1,953


95


1,683Purchase of treasury shares





(4,218
)

(3,510
)Internal equity transactions








Cash provided by (used for) financing activities


1,057


(2,915
)

(25,204
)Effect of foreign exchange rate changes on cash and cash equivalents


(180
)

(206
)

(1,199
)Net increase (decrease) in cash and cash equivalents


2,888


(8,719
)

7,222Cash and cash equivalents at the beginning of the period


6,912


15,631


8,409Cash and cash equivalents at the end of the period


9,800


6,912


15,631


The accompanying notes are an integral part of these consolidated financial statements.

F-8

---



DAIMLER AG AND SUBSIDIARIES
Consolidated Statement of Cash Flows1

Industrial Business
(unaudited additional information)

Daimler Financial Services
(unaudited additional information)in millions of €2009

2008

2007

2009

2008

2007(2,647
)

957


2,611


3


457


1,374

Net profit (loss) adjusted for3,231


2,988


4,105


33


35


41

Depreciation and amortization738


555


3,156


(1,301
)

1,883


358

Other non-cash expense and income(35
)

(712
)

(1,306
)

1


(8
)

(1
)
(Gains) losses on disposals of assetsChange in operating assets and liabilities4,267


(2,628
)

(1,621
)

(35
)

(89
)

(130
)
 Inventories1,787


(517
)

198


8


(10
)

17

 Trade receivables(876
)

(644
)

246


(26
)




(38
)
 Trade payables(615
)

640


(277
)

3,763


(3,093
)

1,108

 Receivables from financial services167


405


57


1,599


(368
)

(3,452
)
 Vehicles on operating leases527


556


(23
)

372


(1,193
)

723

 Other operating assets and liabilities6,544


1,600


7,146


4,417


(2,386
)



Cash provided by (used for) operating activities(2,409
)

(3,518
)

(4,206
)

(14
)

(41
)

(41
)
Additions to property, plant and equipment(1,415
)

(1,599
)

(1,327
)

(7
)

(20
)

(27
)
Additions to intangible assets268


1,490


1,263


12


11


34

Proceeds from disposals of property, plant and equipment and intangible assets(139
)

(905
)

(153
)

(2
)

(1
)

(6
)
Investments in businesses61


468


3,796


6


47


3

Proceeds from disposals of businesses





24,029








(1,435
)
Cash flow related to the transfer of the Chrysler activities(16,560
)

(10,134
)

(15,030
)

(1,222
)






Acquisition of securities (other than trading)12,407


10,246


19,558





95


59

Proceeds from sales of securities (other than trading)71


(1,015
)

(216
)

(7
)

64


178

Change in other cash(7,716
)

(4,967
)

27,714


(1,234
)

155


(1,235
)
Cash provided by (used for) investing activities(1,347
)

1,275


(7,347
)

(985
)

250


(2,416
)
Change in short-term financing liabilities6,887


10,014


(19,508
)

18,013


18,811


35,703

Additions to long-term financing liabilities(3,377
)

(11,936
)

5,240


(19,430
)

(15,186
)

(33,470
)
Repayment of long-term financing liabilities(654
)

(2,010
)

(1,576
)

(3
)

(10
)

(3
)
Dividends paid1,952


95


1,683


1







Proceeds from issuance of share capital (including minority interest)


(4,218
)

(3,510
)









Purchase of treasury shares7


52


154


(7
)

(52
)

(154
)
Internal equity transactions3,468


(6,728
)

(24,864
)

(2,411
)

3,813


(340
)
Cash provided by (used for) financing activities(225
)

(135
)

(1,162
)

45


(71
)

(37
)
Effect of foreign exchange rate changes on cash and cash equivalents2,071


(10,230
)

8,834


817


1,511


(1,612
)
Net increase (decrease) in cash and cash equivalents4,664


14,894


6,060


2,248


737


2,349

Cash and cash equivalents at the beginning of the period6,735


4,664


14,894


3,065


2,248


737

Cash and cash equivalents at the end of the period


The accompanying notes are an integral part of these consolidated financial statements.

F-9

---





DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

1. Summary of significant accounting policies

General information

The consolidated financial statements of Daimler AG and its subsidiaries ("Daimler" or "the Group") have been prepared in accordance
with Section 315a of the German Commercial Code (HGB) and International Financial Reporting Standards (IFRS) and related interpretations as issued by the International Accounting Standards
Board (IASB) and as adopted by the European Union.

Daimler
AG is a stock corporation organized under the laws of the Federal Republic of Germany. The company is entered in the Commercial Register of the Stuttgart District Court under No.
HRB 19360 and its registered office is located at Mercedesstrasse 137, 70327 Stuttgart, Germany.

The
consolidated financial statements of Daimler AG are presented in euro (€).

The
Board of Management authorized the consolidated financial statements for publication on March 1, 2010.

Basis of presentation

Applied IFRSs.The accounting policies applied in the consolidated financial statements comply with the IFRSs required to be
applied as of
December 31, 2009.

In
May 2008, the IASB published its omnibus standard for improvements to International Financial Reporting Standards (IFRS). One of the improvements was an amendment to the presentation
of the derecognition of assets held for rental within the consolidated statement of income (loss) and consolidated statement of cash flows. Proceeds from the sale of assets held for rental in the
course of ordinary activities must be recognized as revenue in accordance with the amended IAS 16 Property, Plant and Equipment. Cash flows resulting from these sales must be shown under cash
flows from operating activities in accordance with the amended IAS 7 Statement of Cash Flows. Daimler applies these amendments as of January 1, 2009 and has adjusted
prior-year presentations accordingly. As a result, revenue and cost of sales recognized in 2009 in the consolidated statement of income (loss) each increased by
€2,706 million (2008: increase of €2,596 million each; 2007: increase of €2,170 million each). The changes in the presentation of
the consolidated statement of cash flows result in cash flows from vehicles on
operating leases of the Daimler Financial Services business being presented within "Cash provided by (used for) operating activities" in the separate line item "Vehicles on operating leases" together
with the cash flows from vehicles on operating leases of the industrial business. This change in classification resulted in a decrease of €1,398 million in "Cash provided by
(used for) operating activities" in 2009 (2008: decrease of €2,338 million; 2007: decrease of €6,913 million). With an opposite effect, "Cash provided by
(used for) investing activities" changed to the same extent in all periods due to this reclassification. In the context of this mandatory reclassification of cash flows from vehicles on operating
leases of the Daimler Financial Services business, the Group decided also to reclassify changes in receivables from financial services from "Cash provided by (used for) investing activities" to "Cash
provided by (used for) operating activities." This change in classification resulted in an increase of €1,172 million in "Cash provided by (used for) operating activities" in
2009 (2008: decrease of €1,653 million; 2007: increase of €971 million). With this additional reclassification, the Group harmonizes the presentation of
the entire sales financing and leasing business in the Group's consolidated statement of cash flows within "Cash provided by (used for) operating activities." The reported changes above did not affect
the consolidated statement of financial position.

In
March 2007, the IASB issued an amendment of IAS 23 Borrowing Costs. The amendment removes the option of immediately recognizing borrowing costs as an expense. The amended
standard requires capitalization of borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets. Assets are considered qualifying when a
substantial period of time is necessary to get them ready for use or sale. Adoption of the amendment is required prospectively as of January 1, 2009 for qualifying assets whose

F-10

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

construction
or production started after that date. In 2009, the Group capitalized borrowing costs of €1 million resulting from long-term development projects.

With
the amendment of IAS 1 Presentation of Financial Statements, the consolidated financial statements contain in addition to the consolidated statement of income (loss) a
consolidated statement of comprehensive income (loss). The latter comprises the profit or loss of the reporting period as well as equity changes other than those changes resulting from transactions
with owners in their capacity as owners that are not recognized in profit or loss (other comprehensive income or loss).

The
IASB issued amendments to IFRS 7 Financial Instruments: Disclosures which require enhanced disclosures about fair value measurement and liquidity risk. The amendments have no
influence on the Group's financial position, financial performance or statement of cash flows.

IFRSs issued and EU endorsed but not yet adopted.In January 2008, the IASB published revisions of IFRS 3 Business
Combinations and
IAS 27 Consolidated and Separate Financial Statements. Major changes are: (a) the requirement that the assets acquired, the liabilities assumed and the equity interests be consistently
measured at fair value on the acquisition date; (b) costs incurred in an acquisition are to be recognized in the income statement of the period; (c) option of measuring any
non-controlling interest in the entity
acquired at fair value; and (d) once control is obtained, all other increases and decreases in ownership interest are reported in equity. Adoption of the standard is required prospectively for
annual periods beginning on or after July 1, 2009, with earlier adoption permitted. Daimler will adopt the standards as of January 1, 2010.

IFRSs issued but neither EU endorsed nor yet adopted.In November 2009, the IASB published IFRS 9 Financial Instruments as
part of its project
of a revision of the accounting guidance for financial instruments. The new standard provides guidance on the accounting of financial assets as far as classification and measurement are concerned. The
standard will be effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted. The Group will not early adopt IFRS 9 Financial Instruments for
2010. Daimler will determine the expected effects on the Groups' consolidated financial statements.

Other
IFRSs issued but not required to be adopted are not expected to have significant influence on the Group's financial position, financial performance or statement of cash flows.

Presentation.Presentation in the statement of financial position differentiates between current and non-current assets and
liabilities.
Assets and liabilities are classified as current if they mature within one year or within a longer operating cycle. Deferred tax assets and liabilities as well as assets and provisions for pensions
and similar obligations are presented as non-current items. The consolidated statement of income (loss) is presented using the cost-of-sales method.

Commercial
practices with respect to certain products manufactured by the Group 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 the activities of its financial services business.

To
enhance 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 IFRS and is not intended to, and does not represent the separate IFRS results of operations and financial position of the Group's industrial or financial services business activities.
Eliminations of the effects of transactions between the industrial and financial services businesses have generally been allocated to the industrial business columns.

F-11

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Measurement.The consolidated financial statements have been prepared on the historical cost basis with the exception of certain
items such as
available-for-sale financial assets, derivative financial instruments or hedged items as well as pensions and similar obligations. Measurement models applied to those
exceptions are described below.

Use of estimates and judgments.Preparation of the consolidated financial statements requires management to make estimates and
judgments 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 revenue and
expense for the period. Significant items related to such estimates and judgments include recoverability of investments in equipment on operating leases, investments in associated companies,
collectability of receivables from financial services, assumptions of future cash flows from cash-generating units or development projects, recoverability of deferred tax assets, useful
lives of plant and equipment, warranty obligations, and assets and obligations related to employee benefits. Actual amounts could differ from those estimates.

Risks and uncertainties.Daimler's financial position, results of operations and cash flows are subject to numerous risks and
uncertainties. For
example, stagnation or a renewed downturn of the global economy could cause actual results to vary from current expectations. Additional parameters which may cause actual results to differ from
current expectations include further increases in overcapacity and the intensity of competition in the automotive industry; dependence on suppliers, especially single-source suppliers; a permanent
shift in consumer preference towards smaller cars; implementation of new technologies; fluctuations in currency exchange rates, interest rates and commodity prices; the resolution of significant legal
proceedings; and environmental and other government regulations.

Principles of consolidation.The consolidated financial statements include the financial statements of Daimler and, in general,
the financial
statements of Daimler's subsidiaries, including special purpose entities which are directly or indirectly controlled by Daimler. Control means the power, directly or indirectly, to govern the
financial and operating policies of an entity so that the Group obtains benefits from its activities.

The
financial statements of consolidated subsidiaries are generally prepared as of the balance sheet date of the consolidated financial statements, except for Mitsubishi Fuso Truck and
Bus Corporation (MFTBC), a significant subgroup which is consolidated with a one-month time lag. Adjustments are made for significant events or transactions that occur during the time lag.

The
financial statements of Daimler and its subsidiaries included in the consolidated financial statements have been prepared using uniform recognition and valuation principles. All
significant intercompany accounts and transactions relating to consolidated subsidiaries and consolidated special purpose entities have been eliminated.

Business
combinations are accounted for using the purchase method.

As
a further funding source, Daimler transfers finance receivables, in particular receivables from the leasing and automotive business, to special purpose entities. Daimler thereby
principally retains significant risks of the transferred receivables. According to IAS 27 Consolidated and Separate Financial Statements and the Standing Interpretations Committee (SIC)
Interpretation 12 ConsolidationSpecial Purpose Entities, those special purpose entities have to be consolidated by the transferor. The transferred financial assets remain on Daimler's
consolidated statement of financial position.

Investments in associated companies and joint ventures.Associated companies are equity investments in which Daimler has the
ability to exercise
significant influence over the financial and operating policies of the investee. Joint ventures are those entities over whose activities Daimler has joint control with partners,

F-12

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

established
by contractual agreement and requiring unanimous consent for strategic financial and operating decisions. Associated companies and joint ventures are accounted for using the equity method.

The
excess of the cost of Daimler's initial investment in equity method companies over the Group's proportionate reassessed ownership interest is recognized as investor level goodwill
and included in the carrying amount of the investment accounted for using the equity method.

If
the carrying amount exceeds the recoverable amount of an investment in any associated company or joint venture, the carrying amount of the investment has to be reduced to the
recoverable amount. The recoverable amount is the higher of fair value less costs to sell and value in use. An impairment loss is recognized in the income statement in the line item "Share of profit
(loss) from investments accounted for using the equity method, net." Income and expenses from the sale of investments accounted for using the equity method are shown in the same line item.

Profits
from transactions with associated companies and joint ventures are eliminated by reducing the carrying amount of the investment.

For
the investments in the European Aeronautic Defence and Space Company EADS N.V. (EADS), Tognum AG (Tognum), Kamaz OAO (Kamaz) anduntil the redemption of the
remaining 19.9% equity interestChrysler Holding LLC (Chrysler), the Group's proportionate share of the results of operations is included in Daimler's consolidated financial
statements with a three-month time lag because the financial statements of those associated companies are not made available timely to Daimler. Adjustments are made for all significant events or
transactions that occur during the time lag (see also Note 12).

Foreign currency translation.Transactions in foreign currency are translated at the relevant foreign exchange rates prevailing
at the transaction
date. Subsequent gains and losses from the remeasurement of financial assets and liabilities denominated in foreign currency are recognized in profit and loss (except for
available-for-sale equity instruments and financial liabilities designated as a hedge of a net investment in a foreign operation).

The
assets and liabilities of foreign companies for which the functional currency is not the euro are translated into euro using period-end exchange rates. The translation
adjustments generated after the transition to IFRS on January 1, 2005 are recorded directly in equity. The consolidated statements of income (loss) and cash flows are translated into euro using
average exchange rates during the respective periods.

The
exchange rates of the US dollar, the most significant foreign currency for Daimler, were as follows:

2009

2008

2007€1 =

€1 =

€1 =Exchange rate at December 31


1.4406


1.3917


1.4721Average exchange rate

First quarter


1.3029


1.4976


1.3106Second quarter


1.3632


1.5622


1.3481Third quarter


1.4303


1.5050


1.3738Fourth quarter


1.4785


1.3166


1.4487


Accounting policies

Revenue recognition.Revenue from sales of vehicles, service parts and other related products is recognized when the risks and
rewards of ownership
of the goods are transferred to the customer, the amount of revenue can be estimated reliably and collectability is reasonably assured. Revenue is recognized net of discounts, cash sales incentives,
customer bonuses and rebates granted.

F-13

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Daimler
uses price discounts in response to a number of market and product factors, including pricing actions and incentives offered by competitors, 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 consumers' monthly lease payment, or reduced financing rate programs offered to consumers.

Revenue
from receivables from financial services is recognized using the effective interest method. When loans are issued below market rates, related receivables are recognized at
present value and revenue is reduced for the interest incentive granted.

The
Group offers an extended, separately priced warranty for certain products. Revenue from these contracts is 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 the expected costs for services under the contract exceeds unearned revenue.

For
transactions with multiple deliverables, such as when vehicles are sold with free or reduced in price service programs, the Group allocates revenue to the various elements based on
their estimated fair values.

Sales
in which the Group guarantees the minimum resale value of the product, such as sales to certain rental car company customers, are accounted for similar to an operating lease. The
guarantee of the resale value may take the form of an obligation by Daimler 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 the resale of these vehicles are included in gross profit.

Revenue
from operating leases is recognized on a straight-line basis over the lease term. Among the assets subject to "Operating Leases" there are Group products, which are
purchased by Daimler Financial Services from independent third-party dealers and leased to customers. After revenue recognition from the sale of the vehicles to independent third-party dealers, these
vehicles create further revenue from leasing and remarketing as a result of lease contracts entered into. The Group estimates, that the revenue recognized following the sale of vehicles to dealers
equals approximately the additions to leased assets at Daimler
Financial Services. Additions to leased assets at Daimler Financial Services were approximately €4 billion in 2009 (2008: approximately €5 billion).

Research and non-capitalized development costs.Expenditure for research and development that does not meet the conditions for
capitalization according to IAS 38 Intangible Assets is expensed as incurred.

Borrowing costs.Borrowing costs are expensed as incurred, unless they are directly attributable to the acquisition,
construction or production of a
qualifying asset and therefore form part of the cost of that asset.

Government grants.Government grants related to assets are deducted in calculating the carrying amount of the asset and are
recognized in profit or
loss over the life of a depreciable asset as a reduced depreciation expense.

Interest income (expense), net.Interest income (expense), net includes interest expense from liabilities, interest income from
investments in
securities, cash and cash equivalents as well as interest and changes in fair values related to interest rate hedging activities. Income and expense resulting from the allocation of premiums and
discounts is also included. Furthermore, the interest component from pensions and similar obligations is disclosed under this line item.

F-14

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

An
exception to the afore mentioned principles is made for Daimler Financial Services. In this case the interest income and expense and the result from derivative financial instruments
are disclosed under revenue and cost of sales, respectively.

Other financial income (expense), net.Other financial income (expense), net includes income and expense
from financial transactions which are not included under interest income (expense), net, e.g. expense from the compounding of interest on provisions for other risks.

Gains
and losses resulting from the issuance of shares by a Group subsidiary to third parties that reduces Daimler's percentage ownership ("dilution gains and losses") and Daimler's
share of any dilution gains and losses reported by its investees accounted for under the equity method are recognized in other financial income (expense), net, or in share of profit (loss) from
companies accounted for using the equity method, net.

Income taxes.Current income taxes are determined based on respective local taxable income of the period and tax rules. In
addition, current income
taxes include adjustments for uncertain tax payments or tax refunds for periods not yet assessed as well as interest expense and penalties on the underpayment of taxes. Deferred tax is included in
income tax expense (benefit) and reflects the changes in deferred tax assets and liabilities except for changes recognized directly in equity.

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 carryforwards and tax credits. Measurement takes place on the basis of the tax rates whose effectiveness is expected for the period in which an asset is realized or a liability is
settled. For this purpose, the tax rates and tax rules are used which have been enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized to the extent that
taxable profit at the level of the relevant tax authority will be available for the utilization of the deductible temporary differences. Daimler recognizes a valuation allowance for deferred tax
assets when it is unlikely that a respective amount of future taxable profit will be available or when Daimler no longer has control over the tax advantage.

Tax
benefits resulting from uncertain income tax positions are recognized at the best estimate of the tax amount expected to be paid.

Discontinued operations.The operating activities of Chrysler including the related financial services business in North America
until
August 3, 2007, the result from the deconsolidation of the Chrysler activities and adjustments of this result are presented as discontinued operations in the Group's consolidated statement of
income (loss) (see Note 2).

Earnings (loss) per share.Basic earnings (loss) per share are calculated by dividing profit or loss attributable to shareholders
of Daimler by the
weighted average number of shares outstanding. Diluted earnings (loss) per share additionally reflect the potential dilution that would occur if all stock option plans were exercised.

Goodwill.For acquisitions consummated after the transition to IFRS on January 1, 2005, goodwill represents the excess of
the cost of an
acquired business over the fair values assigned to the separately identifiable assets acquired and the liabilities assumed. The purchase of minority rights is treated in the same manner. In the case
of an adjustment for contingent consideration, such amount is principally included in goodwill.

Other intangible assets.Intangible assets acquired are measured at cost less accumulated amortization. If necessary,
accumulated impairment losses
will be recognized. Intangible assets with indefinite lives are reviewed annually to determine whether indefinite-life assessment continues to be supportable. If not, the change in the
useful-life assessment from indefinite to finite is made on a prospective basis.

F-15

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Intangible
assets other than development costs with finite useful lives are generally amortized on a straight-line basis over their useful lives (3 to 10 years) and
are reviewed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period for intangible assets with finite useful lives is reviewed at least at
each year-end. Changes in expected useful lives are treated as changes in accounting estimates. The amortization expense on intangible assets with finite useful lives is recorded in
functional costs.

Development
costs are recognized if the conditions for capitalization according to IAS 38 are met. Subsequent to initial recognition, the asset is carried at cost less accumulated
amortization and accumulated impairment losses. Capitalized development costs include all direct costs and allocable overheads and are amortized over the expected product life cycle (2 to
10 years). Amortization of capitalized development costs is an element of the manufacturing costs allocated to those vehicles and components by which they have been generated and is included in
cost of sales when the inventory is sold.

Property, plant and equipment.Property, plant and equipment are valued at acquisition or manufacturing costs less accumulated
depreciation. If
necessary accumulated impairment losses will be recognized. The costs of internally produced equipment and facilities include all direct costs and allocable overheads. Acquisition or manufacturing
costs include the estimate of the costs of dismantling and removing the item and restoring the site, if any. Plant and equipment under finance leases are stated at the lower of present value of
minimum lease payments or fair value less the respective accumulated depreciation and any accumulated impairment losses. Depreciation expense is recognized using the straight-line method.

A
residual value of the asset is considered. Property, plant and equipment are depreciated over the following useful lives:

Buildings and site improvements

10 to 50 yearsTechnical equipment and machinery

6 to 25 yearsOther equipment, factory and office equipment

2 to 30 years


Leasing.Leasing includes all arrangements that transfer the right to use a specified asset for a stated period of time in
return for a payment, even
if the right to use such asset is not explicitly described in an arrangement. The Group is a lessee of property, plant and equipment and a lessor of its products, principally passenger cars, trucks,
vans and buses. It is evaluated on the basis of the risks and rewards of a leased asset whether the ownership of the leased asset is attributed to the lessee (finance lease) or to the lessor
(operating lease). Rent expense on operating leases where the Group is lessee is recognized over the respective lease terms on a straight-line basis. Equipment on operating leases where
the Group is lessor is carried initially at its acquisition or manufacturing cost and is depreciated to its expected residual value over the contractual term of the lease, on a
straight-line basis. The same accounting principles apply to assets if Daimler sells such assets and leases them back from the buyer.

Impairment of non-financial assets.Daimler assesses at each reporting date whether there is an indication that an asset may be
impaired.
If such indication exists, or when annual impairment testing for an asset is required (goodwill, other intangible assets with indefinite useful lives and intangible assets not yet in use), Daimler
estimates the recoverable amount of the asset. The recoverable amount is determined for each individual asset unless the asset does not generate cash inflows that are largely independent of those from
other assets or groups of assets (cash-generating unit). The recoverable amount is the higher of fair value less costs to sell and value in use. Daimler determines the recoverable amount
as fair value less costs to sell and compares it with the carrying amount (including goodwill). Fair value is measured by discounting future cash flows using a risk-adjusted interest rate.
Cash flows, which influence the assessment of residual values, are estimated on the basis of the operative planning (two years period) supplemented by additional information to determine

F-16

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

subsequent
planning periods. Periods not covered by the forecast are taken into account by recognizing a residual value, which principally does not consider any growth rates. If fair value less costs
to sell cannot be determined or is lower than the carrying amount, value in use is calculated. If the carrying amount exceeds the recoverable amount, an impairment charge is recognized amounting to
the difference.

An
assessment for assets other than goodwill is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may
have decreased. If this is the case, Daimler records a partial or an entire reversal of the impairment.

Thereby,
the carrying amount is increased to its recoverable amount. However, the increased carrying amount shall not exceed the carrying amount that would have been determined (net of
depreciation) had no impairment loss been recognized in prior years.

Non-current assets held for sale and disposal groups.Non-current assets held for sale or disposal groups are classified as
held for sale and disclosed separately in the statement of financial position. The assets or disposal groups are then measured at the lower of carrying amount and fair value less costs to sell and are
no longer depreciated. If fair value less costs to sell subsequently increases, any impairment loss previously recognized is reversed. The reversal is restricted to the impairment losses previously
recognized for the assets concerned.

Inventories.Inventories are measured at the lower of cost and net realizable value. The net realizable value is the estimated
selling price less any
remaining costs to sell. The cost of inventories is based on the average cost principle and includes expenditures incurred in acquiring the inventories and bringing them to their
existing location and condition. In the case of manufactured inventories and work in progress, cost also includes production overheads based on normal capacity.

Financial instruments.A financial instrument is any contract that gives rise to a financial asset of one entity and a financial
liability or equity
instrument of another entity. Financial instruments in the form of financial assets and financial liabilities are generally presented separately. Financial instruments are recognized as soon as
Daimler becomes a party to the contractual provisions of the financial instrument.

Upon
initial recognition, financial instruments are measured at fair value. For the purpose of subsequent measurement, financial instruments are allocated to one of the categories
mentioned in IAS 39 Financial Instruments: Recognition and Measurement. Transaction costs directly attributable to acquisition or issuance are considered by determining the carrying amount if
the financial instruments are not measured at fair value through profit or loss. If the transaction date and the settlement date (i.e. the date of delivery) differ, Daimler uses the transaction
date for purposes of initial recognition or derecognition.

Financial assets.Financial assets primarily comprise receivables from financial services, trade receivables, receivables from
banks, cash on hand,
derivative financial assets and marketable securities and investments.

Financial assets at fair value through profit or loss.Financial assets at fair value through profit or loss include those financial
assets
designated as held for trading.

Financial
assets such as shares and interest-bearing securities are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives,
including embedded derivatives separated from the host contract, are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on financial
assets held for trading are recognized in profit or loss.

Loans and receivables.Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted
in an active market, such as receivables from financial services or trade receivables.

F-17

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

After
initial recognition, loans and receivables are subsequently carried at amortized cost using the effective interest method less any impairment losses, if necessary. Gains and losses are
recognized in the income statement when the loans and receivables are derecognized or impaired. Interest effects on the application of the effective interest method are also recognized in profit or
loss.

Available-for-sale financial assets.Available-for-sale financial assets are
non-derivative financial assets that are designated as available for sale or that are not classified in any of the preceding categories. This category includes, among others, equity
instruments and debt instruments such as government bonds, corporate bonds and commercial paper.

After
initial measurement, available-for-sale financial assets are measured at fair value with unrealized gains or losses being recognized in equity within other
reserves (reserves from financial assets available-for-sale). If objective evidence of impairment exists or if changes in the fair value of a debt instrument resulting from
currency fluctuations occur, these changes are recognized in profit or loss. Upon disposal of financial assets, the accumulated gains and losses recognized in equity resulting from measurement at fair
value are recognized in profit or loss. If a reliable estimate of the fair value of an unquoted equity instrument such as investments in German limited liability companies, cannot be made, this
instrument is measured at cost (less any impairment losses). Interest earned on these financial assets is generally reported as interest income using the effective interest rate method. Dividends are
recognized in profit or loss when the right of payment has been established.

Cash and cash equivalents.Cash and cash equivalents consist primarily of cash on hand, checks, demand deposits at banks as well as
debt instruments
and certificates of deposits with an original term of up to three months. Cash and cash equivalents correspond with the classification in the consolidated statements of cash flows.

Impairment of financial assets.At each reporting date, the carrying amounts of the financial assets other than those to be
measured at fair value
through profit or loss are assessed to determine whether there is objective, significant evidence of impairment (e.g. a debtor is facing serious financial difficulties or there is a substantial
change in the technological, economic, legal or market environment of the debtor).

For
quoted equity instruments, a significant or prolonged decline in fair value is an additional objective evidence for a possible impairment. Daimler has defined criteria for the
significance and duration of a decline in fair value.

A
decline in fair value is deemed significant if it exceeds 20% of the carrying amount of the investment; it is deemed prolonged to the extent that it does not reverse within nine
months.

Loans and receivables.The amount of the impairment loss on loans and receivables is measured as the difference between the carrying
amount of the
asset and the present value of estimated future cash flows (excluding expected future credit losses that have not been incurred), discounted at the original effective interest rate of the financial
asset. The amount of the impairment loss is recognized in profit or loss.

If,
in a subsequent reporting period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized,
the impairment loss recorded in prior periods is reversed and recognized in profit or loss.

In
most cases, an impairment loss on loans and receivables (e.g. receivables from financial services including finance lease receivables, trade receivables) is recorded using
allowance accounts. The decision to account for credit risks using an allowance account or by directly reducing the receivable depends on the estimated probability of the loss of receivables. When
receivables are assessed as uncollectible, the impaired asset is derecognized.

F-18

---





DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Available-for-sale financial assets.If an available-for-sale financial asset is impaired, the
difference between its cost (net of any principal payment and amortization) and its current fair value, less any impairment loss previously recognized in the income statement, is reclassified from
direct recognition in equity to the income statement. Reversals with respect to equity instruments classified as available for sale are recognized in equity. Reversals of impairment losses on debt
instruments are reversed through the statement of income if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment losses were recognized in
income.

Financial liabilities.Financial liabilities primarily include trade payables, liabilities to banks, bonds, derivative financial
liabilities and
other liabilities.

Financial liabilities measured at amortized cost.After initial recognition, financial liabilities are subsequently measured at
amortized cost using
the effective interest method.

Financial liabilities at fair value through profit or loss.Financial liabilities at fair value through profit or loss include financial
liabilities
held for trading. Derivatives, including embedded derivatives separated from the host contract, are classified as held for trading unless they are designated as effective hedging instruments in hedge
accounting. Gains or losses on liabilities held for trading are recognized in profit or loss.

Derivative financial instruments and hedge accounting.Daimler uses derivative financial instruments such as forward contracts,
swaps, options,
futures, swaptions, forward rate agreements, caps and floors mainly for the purpose of hedging interest rate and currency risks that arise from its operating, financing, and investing activities.

Embedded
derivatives are separated from the host contract which is not measured at fair value through profit or loss when the analysis shows that the economic characteristics and risks
of embedded derivatives are not closely related to those of the host contract.

Derivative
financial instruments are measured at fair value upon initial recognition and at each subsequent reporting date. The fair value of listed derivatives is equal to their
positive or negative market value. If a market value is not available, fair value is calculated using standard financial valuation models such as discounted cash flow or option pricing models.
Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.

If
the requirements for hedge accounting set out in IAS 39 are met, Daimler designates and documents the hedge relationship from the date a derivative contract is entered into as
either a fair value hedge or a cash flow hedge. In a fair value hedge, the fair value of a recognized asset or liability or an unrecognized firm commitment is hedged. In a cash flow hedge, the
variability of cash flows to be received or paid related to a recognized asset or liability or a highly probable forecast transaction is hedged. The documentation of the hedging relationship includes
the objectives and strategy of risk management, the type of hedging relationship,
the nature of risk being hedged, the identification of the hedging instrument and the hedged item, as well as a description of the method used to assess hedge effectiveness. The hedging transactions
are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are regularly assessed to determine that they have actually been highly effective throughout the
financial reporting periods for which they are designated.

Changes
in the fair value of derivative financial instruments are recognized periodically in either earnings or equity, as a component of other reserves, depending on whether the
derivative is designated as a hedge of changes in fair value or cash flows. For fair value hedges, changes in the fair value of the hedged item and the derivative are recognized currently in earnings.
For cash flow hedges, fair value changes in the effective portion of the hedging instrument are recognized in other reserves, net of applicable taxes. Amounts taken to equity are

F-19

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

reclassified
to the income statement when the hedged transaction affects the income statement. The ineffective portion of the fair value changes is recognized in profit or loss.

If
derivative financial instruments do not or no longer qualify for hedge accounting because the qualifying criteria for hedge accounting are not or are no longer met, the derivative
financial instruments are classified as held for trading.

Pensions and similar obligations.The measurement of defined benefit plans for pensions and other post-employment benefits
(e.g. medical care) in accordance with IAS 19 Employee Benefits is based on the projected unit credit method. For the valuation of defined post-employment benefit plans,
differences between actuarial assumptions used and actual results and changes in actuarial assumptions result in actuarial gains and losses, which have to be amortized in future periods. Amortization
of unrecognized actuarial gains and losses arising after the transition to IFRS on January 1, 2005 is recorded in accordance with the "corridor approach." This approach requires partial
amortization of actuarial gains and losses in the following year with an effect on earnings if the unrecognized gains and losses exceed 10 percent of the greater of (1) the defined
post-employment benefit obligation or (2) the fair value of the plan assets. In such cases, 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.

When
the benefits of a plan are changed, the portion of the change in benefit relating to past service by employees is recognized in profit or loss on a straight-line basis
over the average period until the benefits become vested. To the extent that the benefits vest immediately, the impact is recognized directly in profit or loss.

A
negative net obligation arising from prepaid future contributions is only recognized as an asset to the extent that a cash refund from the plan or reductions of future contributions to
the plan are available. Any exceeding amount is recognized in net periodic pension costs in the period when it is incurred ("asset ceiling").

Provisions for other risks and contingent liabilities.A provision is recognized when a liability to third parties has been
incurred, an outflow of
resources is probable and the amount of the obligation can be reasonably estimated. In particular, restructuring provisions are recognized when the Group has a detailed formal plan that has either
commenced implementation or been announced. Provisions are regularly reviewed and adjusted as further information develops or circumstances change.

The
provision 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.

Daimler
records the fair value of an asset retirement obligation from the period in which the obligation is incurred.

The
restructuring provisions arise from planned programs that materially change the scope of business performed by a segment or business unit or the manner in which business is
conducted. In most cases, restructuring expenses include termination benefits and compensation payments due to the termination of agreements with suppliers and dealers.

Share-based payment.Share-based payment comprises cash-settled liability awards and equity-settled equity awards.

The
fair value of equity awards is generally determined by using a modified Black-Scholes option pricing model at grant date and represents the total payment expense to be recognized
during the service period with a corresponding increase in equity (paid-in capital).

F-20

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Liability
awards are measured at fair value at each balance sheet date until settlement and are classified as provisions. The expense of the period comprises the addition to and the
reversal of the provision between two reporting dates and the dividend equivalent paid during the period.

Presentation in the consolidated statements of cash flows.Interest and taxes paid as well as interest and dividends received
are classified as cash
provided by operating activities. Dividends paid are shown in cash provided by (used for) financing activities.

2. Significant acquisitions and dispositions of interests in companies and of other assets and liabilities

Acquisitions

Tognum.In 2008, the Group acquired an aggregate 28.4% stake in Tognum AG (Tognum). The acquisition costs amounted to
€702 million in cash. The Group accounts for its equity interest in Tognum using the equity method (see also Note 12 for further information).

Dispositions

Daimler Financial Services.In line with the ongoing concentration on the automotive business, Daimler Financial Services
disposed of
non-automotive assets subject to finance leases (mainly leveraged
leases) in 2009, which resulted in cash inflows of €825 million. After consideration of the costs of the transactions, the Group recorded a pre-tax loss of
€31 million within cost of sales in the 2009 consolidated statement of income (loss). The expense is allocated to the Daimler Financial Services segment.

In
addition, non-automotive assets subject to leveraged leases are presented separately as assets held for sale in the consolidated statement of financial position as of
December 31, 2009 (€310 million). Measurement of these assets at fair value less costs to sell resulted in a pre-tax expense of
€69 million in 2009, which is included in cost of sales in the consolidated statement of income (loss). The expense is allocated to the Daimler Financial Services segment. For
further information on sales of non-automotive assets from the leasing business, see Notes 13 and 18.

Chrysler.On May 14, 2007, the Board of Management of Daimler AG decided to transfer a majority interest in Chrysler and the
related financial
services business in North America to a subsidiary of the private-equity firm Cerberus Capital Management, L.P. (Cerberus). On May 16, 2007, the Supervisory Board of Daimler AG approved
the transaction; the transaction was consummated on August 3, 2007.

On
August 3, 2007, Cerberus made a capital contribution of €5.2 billion (US$7.2 billion) in cash for an 80.1% equity interest in the newly
established company Chrysler Holding LLC (Chrysler Holding), which controlled the Chrysler activities. Of that cash, Daimler withdrew €0.9 billion
(US$1.2 billion). As a result, Daimler retained a 19.9% equity interest in this entity, which was accounted for using the equity method until the redemption of the remaining investment on
June 3, 2009 (see also Note 12).

In
connection with the closing of the transaction in August 2007, subsidiaries of Chrysler Holding LLC repaid €24.7 billion of liabilities to the Group in
cash.

In
addition, certain previously outstanding guarantees provided by the Group for the benefit of Chrysler continue to be outstanding. At December 31, 2009, the amount of those
guarantees was €0.3 billion. As coverage of the liabilities underlying these guarantees, Chrysler provided collateral to an escrow account of
€0.2 billion as of December 31, 2009.

F-21

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Based
on a binding term sheet signed in April 2009, Daimler and Cerberus entered into a redemption agreement in June 2009. As a result, since June 3, 2009, Daimler no longer has
any equity interest in Chrysler Holding or its subsidiaries and all Daimler representatives resigned from the boards of Chrysler Holding and its subsidiaries.

The
binding term sheet also provided for a settlement agreement covering issues relating to Chrysler which Daimler, the US Pension Benefit Guaranty Corporation (PBGC),
Chrysler LLC (Chrysler) and Cerberus entered into in June 2009. Among other matters, Chrysler and Cerberus waived all claims that might arise from the representations and warranties made in the
contribution agreement dated August 3, 2007, including claims by Cerberus that Daimler allegedly improperly managed certain issues in the period between the signing of the contribution
agreement and the conclusion of the transaction, as well as certain other claims against Daimler.

In
addition, in June 2009, Daimler paid US$200 million into Chrysler's pension plans and will make further payments of US$200 million in each of the next two years. The
2007 Daimler pension guarantee of US$1 billion vis-à-vis the PBGC has been replaced by a new guarantee in an amount of US$200 million that will
remain in place until August 2012.

Moreover,
the settlement agreement provides for the forgiveness of Daimler's receivables in connection with a subordinated loan and a credit line for Chrysler's automotive business which
was drawn in 2008. The Group provided the credit line in connection with the transaction contracted on August 3, 2007. The nominal amounts of these receivables, which were fully impaired at
December 31, 2008, were US$0.4 billion and US$1.5 billion. However, the forgiveness of the US$1.5 billion second lien loan by Daimler was subject to the condition that
certain unsecured creditors of Chrysler, represented by a committee under US bankruptcy law, will not bring litigation against Daimler in the course of the current Chrysler bankruptcy proceedings. In
the third quarter 2009, the committee of the unsecured creditors filed a complaint with the bankruptcy court. In consequence, the forgiveness was rescinded (see also Note 27).

The
contractual agreements described above negatively impacted 2009 EBIT by €379 million; these results are included in the reconciliation of total segments' EBIT
to Group EBIT.

In
connection with the legal transfer of Chrysler's international sales activities to Chrysler in the first quarter of 2009 and due to the valuation of Chrysler-related assets, the Group
recorded a total gain before income taxes of €85 million in 2009. This gain is included in the reconciliation of total segments' EBIT to Group EBIT in the segment reporting.

Daimler
and its Chinese partner Beijing Automotive Industry Holding Co. Ltd. (BAIC) each own a 50% equity interest in the joint venture
Beijing-Benz-DaimlerChrysler Automotive Co. Ltd. (BBDC), which manufactures and distributes Mercedes-Benz passenger cars and Chrysler vehicles in
China. In connection with the transfer of the majority interest in Chrysler in 2007, Daimler, Chrysler and Cerberus agreed on a framework dealing with the future business model at BBDC. Under the
framework agreement, the final terms of future cooperation at BBDC with respect to the manufacturing of Chrysler vehicles should be determined at a later point in time.

In
June 2008, it was agreed, subject to consent by BAIC and BBDC, that the manufacturing of Chrysler vehicles at BBDC should be discontinued by the end of the existing license
agreements.

In
this context, in December 2008, Daimler, BAIC and BBDC entered into a contract, which determines that Daimler should be responsible for certain costs related to Chrysler vehicles at
BBDC and reimburse such costs to BBDC, since they are directly connected to the transfer of the majority interest in Chrysler. The costs include in particular the impairment of plant and equipment,
the valuation of Chrysler inventories at BBDC and compensation payments to suppliers and dealers. Daimler does not obtain an additional interest in BBDC in exchange.

F-22

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Therefore,
in 2007 and 2008, Daimler recognized charges of €103 million and €293 million, respectively, (before income taxes) within "Net
profit (loss) from discontinued operations" to record an estimated total cost of €396 million. An amount of €42 million was paid in 2009 (2008:
€186 million). Furthermore, estimated costs were partially offset with gains from the ongoing Mercedes-Benz passenger cars business at BBDC. The Group expects the
remaining amount of the provisions of €174 million (after currency translation) to be cash effective in 2010.

The
net profit or loss of the Chrysler activities is included in the Group's consolidated statement of income (loss) in the line item "Net profit (loss) from discontinued operations" for
2007. The Group ceased to depreciate or amortize the non-current assets of the disposal group upon classification as assets and liabilities held for sale on May 16, 2007.

In
2007, the assets and liabilities of the Chrysler activities were derecognized following the consummation of the transaction on August 3, 2007. The loss from the deconsolidation
of €753 million is also included in the line item "Net profit (loss) from discontinued operations."

The
future tax benefits of temporary differences related to the assets and liabilities of the transferred Chrysler activities continue to be available to Daimler with certain
limitations. At the closing date of the Chrysler transaction, the deferred tax assets with respect to these temporary differences amounted to €2.0 billion. As a result of the
Chrysler transaction, the conditions to use these deferred taxes changed; the necessary assessment of the recoverability of these assets in the third quarter of 2007 led to a valuation allowance of
€2.0 billion. Furthermore, the Group had to write off €0.2 billion on foreign tax credits. These expenses are included in income tax expense from
continuing operations in the consolidated statement of income for 2007.

Net
profit (loss) from discontinued operations for the years 2008 and 2007 is comprised as follows:

in millions of €

2008

2007Revenue





30,037Cost of sales





(26,410
)Selling expenses





(1,579
)General administrative expenses





(1,172
)Research and non-capitalized development costs





(647
)Other income and other expenses





(714
)Profit (loss) before income taxes





(485
)Income taxes





368Profit (loss) of Chrysler activities, net of taxes1





(117
)Loss from deconsolidation before income taxes


(383
)

(658
)Income taxes


93


(95
)Loss from deconsolidation, net of taxes


(290
)

(753
)Net profit (loss) from discontinued operations


(290
)

(870
)


1In
2007, income and expenses of the Chrysler activities relate to the period from January 1 to August 3, 2007.


Net loss from discontinued operations for 2007 includes charges of €906 million before income taxes in connection with
Chrysler's Recovery and Transformation Plan, which was announced on February 14, 2007.

An
extinguishment loss of €0.5 billion (net of tax €0.3 billion) resulting from the early redemption of long-term debt of
Chrysler is included in net profit (loss) from discontinued operations in 2007.

F-23

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

The
cash flows of 2007 attributable to discontinued operations are as follows:

in millions of €Cash flow from operating activities


1,593Cash flow from investing activities


(1,404
)Cash flow from financing activities


(2,655
)


For
further information on Chrysler, see also Note 12.

Potsdamer Platz.On December 13, 2007, the Supervisory Board of Daimler AG approved the sale of real-estate properties at
Potsdamer Platz to the SEB Group. The transaction, which closed on February 1, 2008, resulted in a cash inflow of €1.4 billion (thereof
€0.1 billion included in 2007). The transaction had a positive effect on 2008 EBIT of €449 million. The pre-tax gain is recognized in other
operating income in the 2007 consolidated statement of income and is included in the 2007 reconciliation from total segments' EBIT to Group EBIT in the segment reporting.

At
the same time, the Group entered into leases for approximately half of the sold office space with a non-cancelable lease period ending December 31, 2012. At the end
of the non-cancelable lease terms, there are two renewal options for five years each.

MFTBC.In 2007, Mitsubishi Fuso Truck and Bus Corporation (MFTBC) sold a number of real estate properties to Nippon Industrial
TMK for approximately
€1 billion in cash. At the same time, MFTBC entered into a leaseback arrangement for each of the properties sold with non-cancelable lease periods of fifteen years.
At the end of the non-cancelable lease terms, there are renewal options for up to fifteen years. As a result of this transaction, MFTBC derecognized assets with a carrying amount of
€865 million. After considering the costs of the transaction, Daimler recorded a gain of €78 million before income taxes on assets sold and leased back
under the terms of an operating lease. In addition, the Group recorded assets sold and leased back under the terms of finance leases
with a corresponding amount of debt of €110 million and deferred the recognition of the excess of the purchase price over the carrying amount of the assets sold of
€46 million, which will be recognized over the lease term. The pre-tax gain recorded is included in other operating income in the 2007 consolidated statement of
income and was allocated to the Daimler Trucks segment.

Other sales of real estate property.In 2007, Daimler AG sold its 50% equity interest in Wohnstätten Sindelfingen GmbH
for a
sales price of €82 million. The sale resulted in a gain of €73 million before income taxes. The pre-tax gain is included in other financial
income (expense), net, in the 2007 consolidated statement of income and is included in the 2007 reconciliation from total segments' EBIT to Group EBIT in the segment reporting.

EADS.For information on the disposal of equity interests in the European Aeronautic Defence and Space Company EADS N.V.
(EADS), please see
Note 12.

F-24

---





DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

3. Revenue

Revenue at Group level consists of the following:

in millions of €

2009

2008

2007Sales of goods


66,772


85,787


89,976Rental and leasing business


8,886


9,300


8,498Interest from the financial services business


2,885


3,009


2,715Sales of services


381


373


38078,924


98,469


101,569


Revenue
by segment and region is presented in Note 31.

4. Functional costs

Cost of sales.Cost of sales includes the following items:

in millions of €

2009

2008

2007Cost of goods sold


54,276


66,122


66,313Depreciation of equipment on operating leases


3,450


3,553


3,280Refinancing costs Daimler Financial Services


2,211


2,147


2,055Impairment losses on receivables from financial services


853


730


487Other cost of sales


4,777


4,358


5,43965,567


76,910


77,574


In
addition, in 2007, costs of goods sold of the Chrysler activities (until August, 3) of €22,267 million were included in net profit (loss) from
discontinued operations.

Selling expenses.In 2009, selling expenses amounted to €7,608 million (2008: €9,204 million; 2007:
€8,956 million). Selling expenses include direct selling costs as well as selling overhead expenses and consist of personnel costs, material costs and other selling costs.

General administrative expenses.General administrative expenses amounted to €3,287 million in 2009 (2008:
€4,124 million; 2007: €4,023 million) and comprise expenses which were not attributable to production, sales, research and development functions,
including personnel expenses, depreciation and amortization on fixed and intangible assets, and other administrative costs.

Research and non-capitalized development costs.Research and non-capitalized development costs were
€2,896 million in 2009 (2008: €3,055 million; 2007: €3,158) and primarily comprise personnel expenses and material costs.

Amortization
expense of capitalized development costs amounted to €647 million in 2009 (2008: €638 million; 2007:
€623 million) and are recognized in cost of sales.

Optimization programs.Measures and programs with implementation costs that materially impacted EBIT are briefly described
below:

Mitsubishi Fuso Truck and Bus Corporation (MFTBC). In May 2009, the Board of Management of Daimler AG decided on a major realignment of
the operations of its subsidiary MFTBC. Measures provided for in the plan

F-25

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

include
the streamlining of the product portfolio, the realignment of manufacturing sites, the streamlining of the retail network in Japan, and other efficiency improvements. In connection with these
measures, the Group anticipates, among other things, the relocation and idling of selected production sites, headcount reductions of up to 2,300 employees by the end of 2010, and a reduction of the
dealer network. As a result of this plan, the Group recorded charges of €245 million in 2009. The charges primarily relate to headcount reduction measures
(€120 million) and to accelerated depreciation as a result of the reduction of useful lives (€49 million). The premature termination of utilization of
leased assets led to charges of €25 million.

Costs
associated with this plan are included in the following line items within the consolidated statement of income (loss):

in millions of €

2009Cost of sales


61Selling expenses


136General administrative expenses


35Research and non-capitalized development costs


13245


The
measures initiated resulted in cash outflows in 2009 of €31 million.

For
the measures initiated, the Group recorded provisions of €156 million as of December 31, 2009, which are included in provisions for other risks and are
expected to lead to payments in 2010.

Daimler Trucks North America (DTNA).In response to continuing depressed demand across the industry and
structural changes in the company's core markets, the Group adopted a wide-ranging plan in October 2008 to optimize and reposition the business operations of its subsidiary Daimler Trucks
North America (DTNA). Measures provided for in the plan include the discontinuation of the Sterling Trucks brand in 2009, further consolidation of the production network in the NAFTA region, capacity
adjustments, including the closing of two manufacturing plants in 2009 and 2010. In addition, the plan includes headcount reductions of up to 3,500 employees, which were primarily accomplished in
2009. Based on new information available, the Group decided in 2009 not to proceed with the closing of one truck manufacturing plant, which was originally scheduled for 2010. Relating to this plan,
the Group recorded charges of €95 million in 2009 (2008: €233 million). Costs associated with headcount reduction measures resulted in further charges of
€11 million (2008: €106 million). Additional charges of €15 million (2008: €81 million) were recorded in
connection with the termination of agreements with dealers of the Sterling Trucks. Accelerated depreciation of assets as a result of the reduction of useful lives led to charges of
€37 million (2008: €20 million) and supplier compensations resulted in further charges of €3 million (2008:
€14 million).

Costs
associated with this plan are included in the following line items within the consolidated statement of income (loss):

in millions of €

2009

2008Cost of sales


11


44Selling expenses


23


88General administrative expenses


56


101Research and non-capitalized development costs


1


Other operating expense


4


95


233


F-26

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

The
measures initiated resulted in cash outflows in 2009 of €151 million (2008: €5 million).

For
the measures initiated, the Group recorded provisions of €34 million as of December 31, 2009 (2008: €180 million), which are
included in provisions for other risks and are expected to lead to payments primarily in 2010.

New management model.In January 2006, Daimler announced the new management model, the primary objective of which was to install
integrated processes
and eliminate redundancies through the global integration of certain administrative functions. All charges incurred under the new management model, as far as these charges were not part of
discontinued operations, were corporate-level costs, which were not allocated to the segments but are included in the Group's corporate items in the reconciliation from total segments' EBIT to Group
EBIT.

In
connection with the new management model, charges for employee severance of €58 million and €167 million were recorded in 2008 and 2007.
These charges are included in the Group's consolidated statement of income (loss) primarily within general administrative expenses. In 2007, expenses of €16 million are included
in "net profit (loss) from discontinued operations."

Personnel expenses and number of employees.Personnel expenses included in the consolidated statement of income (loss) as well as
the average number
of people employed are as follows:

in millions of € and
number of people employed

2009

2008

2007Personnel expenses1


14,073


15,066


16,174People employed


258,628


274,330


271,704thereof trainees/apprentices2


12,911


13,414


12,672


1Figures
for 2007 do not include the personnel expenses of the de-consolidated Chrysler activities (€4,082 million through August 3, 2007).2Figures
for 2007 do not include the workforce of the de-consolidated Chrysler activities (85,296 employees).


Information on the remuneration of the current and former members of the Board of Management and the current members of the Supervisory Board is
included in Note 35.

5. Other operating income and expense

Other operating income consists of the following:

in millions of €

2009

2008

2007Gains on sales of property, plant and equipment


44


504


167Rental income, other than income relating to financial services


51


52


39Gains on sales of businesses


1


37


5Reimbursements under insurance policies


20


23


24Other miscellaneous income


577


618


506693


1,234


741


Other
miscellaneous income include income from government grants and subsidies, reimbursements of non-income related taxes, income from employee canteens and other
miscellaneous items. In 2009, other miscellaneous income comprises reimbursements of social insurance contributions, granted by the Federal Employment Office related to short-time work in
the German production plants (€93 million).

F-27

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Gains
on sales of property, plant and equipment in 2008 included gains from the sale of real estate properties at Potsdamer Platz to the SEB Group in an amount of
€449 million (see Note 2).

In
2007, gains on sales of property, plant and equipment mainly resulted from the sale of property in Japan to Nippon Industrial TMK (€78 million) and of several
other properties.

Other
operating expense consists of the following:

in millions of €

2009

2008

2007Loss on sales of non-current assets


(56
)

(47
)

(78
)Other miscellaneous expenses


(447
)

(407
)

(636
)(503
)

(454
)

(714
)


Other
miscellaneous expenses include losses from sales of current assets, changes in other provisions and other miscellaneous items.

6. Other financial income (expense), net

in millions of €

2009

2008

2007Expense from compounding of provisions1


(1,003
)

(429
)

(444
)Miscellaneous other financial income (expense), net


(338
)

(1,799
)

216(1,341
)

(2,228
)

(228
)


1Excluding
the expense from compounding provisions for pensions and similar obligations.


In 2009, payments and the commitment to further payments into the Chrysler pension plans resulted in expenses of
€0.4 billion and are included in miscellaneous other financial income (expense), net. In addition, income of €0.1 billion in connection with the
revaluation of loans, receivables and other assets relating to Chrysler (2008: expenses of €1.7 billion from the impairment of these assets) is included in 2009 miscellaneous
other financial income (expense), net. In 2007, the mark-to-market valuation of the derivative financial instruments in connection with EADS shares resulted in a gain of
€121 million, which is included in miscellaneous other financial income (expense), net.

7. Interest income (expense), net

in millions of €

2009

2008

2007Interest and similar income


465


729


782Interest and similar expenses


(971
)

(681
)

(480
)Expected return on pension and other plan assets


671


915


992Interest cost for pension and other post-employment benefit plans


(950
)

(898
)

(823
)(785
)

65


471


F-28

---





DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

8. Income taxes

Profit (loss) before income taxes consists of the following:

in millions of €

2009

2008

2007Germany


(2,543
)

4,283


6,768Non-German countries


245


(1,488
)

2,413(2,298
)

2,795


9,181


The profit before income taxes in Germany includes the income (loss) from companies accounted for using the equity method if the shares of those
companies are held by German companies.

Income
tax expense is comprised of the following components:

in millions of €

2009

2008

2007Current taxesGermany


423


238


44Non-German countries


472


650


934Deferred taxesGermany


(883
)

964


1,060Non-German countries


334


(761
)

2,288346


1,091


4,326


The current tax expense includes expenses at German and foreign companies of €237 million (2008: benefit of
€106 million; 2007: benefit of €679 million) recognized for prior periods.

The
deferred tax expense (benefit) is comprised of the following components:

in millions of €

2009

2008

2007Deferred taxes


(549
)

203


3,348due to temporary differences


(218
)

232


3,465due to tax loss carry forwards and tax credits


(331
)

(29
)

(117
)


In 2007, the German government enacted new tax legislation ("Unternehmensteuerreformgesetz 2008") which, among other changes, decreased the
Group's statutory corporate tax rate for German companies from 25% to 15%, effective January 1, 2008. For trade tax, the basic measurement rate was reduced from 5% to 3.5% but the tax
deductibility of trade tax was abolished. The effect of the change in the tax rate on the deferred tax assets and liabilities of the Group's German companies was recognized in 2007, the year of
enactment.

For
German companies, the deferred taxes were calculated using a federal corporate tax rate of 15%, a solidarity tax surcharge of 5.5% for each year on federal corporate taxes, plus a
trade tax of 14%. In total, the tax rate applied for the calculation of German deferred taxes amounted to 29.825%. For non-German companies, the deferred taxes at period-end
were calculated using the tax rates of the respective countries.

F-29

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

A
reconciliation of expected income tax expense (benefit) to actual income tax expense determined using the applicable German combined statutory rate of 29.825% (2008: 29.825%; 2007:
38.5%) is included in the following table:

in millions of €

2009

2008

2007Expected income tax expense (benefit)


(685
)

834


3,535Foreign tax rate differential


(74
)

(265
)

(193
)Trade tax rate differential


(40
)

(111
)

(101
)Tax law changes


2


4


(170
)Change of valuation allowance on deferred tax assets


695


314


2,354Tax-free income and non-deductible expenses


509


243


(1,044
)Other


(61
)

72


(55
)Actual income tax expense


346


1,091


4,326


At December 28, 2007, the protocol amending the convention between Germany and the United States for the avoidance of double taxation
entered into force, which, among other changes, under certain circumstances abolishes withholding tax on dividend distributions from a US subsidiary to a German holding company, effective
January 1, 2007. The deferred tax liabilities previously recorded by the Group for US withholding taxes on the future payout of dividends by US subsidiaries to Germany were reversed in 2007.
Furthermore, US withholding taxes paid by the Group in 2007 were added back again. In total, both caused an income tax benefit amounting to €168 million in 2007, included in the
line "tax law changes." Additionally, the line tax law changes includes the deferred tax benefit of €51 million due to the revaluation of the net deferred tax liabilities of the
German companies as a result of the above mentioned new German tax law 2008 and other effects from tax law changes at foreign companies.

In
2009 and 2008, the Group recorded additional valuation allowances on deferred tax assets of foreign subsidiaries. In 2007, tax expenses were recorded as a result of a valuation
allowance on deferred tax assets related to the deconsolidated Chrysler activities. These deferred tax assets continued to be allocated to the Daimler Group, but as a result of the Chrysler
transaction, the conditions for using these deferred taxes had changed. Furthermore, as a result of the Chrysler transaction, a valuation allowance on foreign tax credits was required in 2007. In 2009
and 2008, the Group reversed a part of this valuation allowance due to the conversion of those assets into taxable losses attributable to the Daimler Group. The resulting tax expenses and benefits are
included in the line "change of valuation allowance on deferred tax assets."

Tax-free
income and non-deductible expenses include all other effects at foreign and German companies due to tax-free income and
non-deductible expenses, for instance tax-free gains included in net periodic pension costs at the German companies and tax-free results of our equity-method
investments. Moreover, the line also includes the following effects:

In
2009, adjustments regarding transfer pricing risks at our former investment Chrysler in Canada caused an additional tax expense. Daimler Group has to account for this obligation.
Furthermore, additional tax expenses relating to tax assessments and estimations for prior years are included.

In
2008 and 2007, Daimler realized a largely tax-free gain due to the transfer of interest in EADS. Furthermore, in 2007 a largely tax-free gain was realized on
financial transactions to hedge price risks of EADS shares. The calculated expected income taxes on the tax-free gains were reversed in 2008 and 2007 in the line "tax-free
income and non-deductible expenses" with an amount of €34 million and €582 million, respectively.

F-30

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

In
respect of each type of temporary difference and in respect of each type of unutilized tax losses and unutilized tax credits, the deferred tax assets and liabilities before offset are
summarized as follows:

At December 31,in millions of €

2009

2008Intangible assets


84


120Property, plant and equipment


646


559Equipment on operating leases


659


953Inventories


562


701Investments accounted for using the equity method


15


2,357Receivables from financial services


117


89Other financial assets


3,324


3,622Tax loss and tax credit carry forwards


5,770


3,703Provisions for pensions and similar obligations


620


610Other provisions


1,874


1,729Liabilities


882


1,351Deferred income


751


552Other


74


4915,378


16,395Valuation allowances


(3,096
)

(3,510
)Deferred tax assets, gross


12,282


12,885Development costs


(1,598
)

(1,406
)Other intangible assets


(67
)

(88
)Property, plant and equipment


(999
)

(1,239
)Equipment on operating leases


(3,159
)

(3,775
)Inventories


(132
)

(140
)Receivables from financial services


(805
)

(1,403
)Other financial assets


(110
)

(158
)Other assets


(257
)

(522
)Provisions for pensions and similar obligations


(2,851
)

(2,640
)Other provisions


(264
)

(193
)Taxes on undistributed earnings of non-German subsidiaries


(46
)

(48
)Other


(270
)

(170
)Deferred tax liabilities, gross


(10,558
)

(11,782
)Deferred tax assets, net


1,724


1,103


Deferred tax assets and deferred tax liabilities were offset if the deferred tax assets and liabilities relate to income taxes levied by the same
taxation authority and if there is the right to set off current tax assets against current tax liabilities. In the statement of financial position, the deferred tax assets and liabilities are not
divided into current and non-current.

F-31

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

In
2009, the increase in deferred tax assets, net, amounted to €621 million (2008: decrease of €106 million; 2007: decrease of
€3,292 million) and was composed of:

in millions of €

2009

2008

2007Deferred tax expense (benefit) on financial assets available-for-sale charged or credited directly to related components of equity


8


(13
)

(16
)Deferred tax expense (benefit) on derivative financial instruments charged or credited directly to related components of equity


(123
)

(15
)

177Income tax expense (benefit) for deduction in excess of compensation expense for equity-settled employee stock option plans





25


(146
)Disposal of Chrysler activities








120Other neutral decrease (increase)1


43


(48
)

165Deferred tax expense (benefit)


(549
)

157


2,992Thereof included in net profit (loss) from continuing operations


(549
)

203


3,348Thereof included in net profit (loss) from discontinued operations





(46
)

(356
)


1Primarily
effects from currency translation.


In 2007, the neutral change of deferred tax assets, net, includes a neutral reduction of deferred tax liabilities amounting to
€76 million due to tax law changes.

Including
the items charged or credited directly to related components of equity without an effect on earnings (including items charged or credited from investments accounted for using
the equity method) and the income
tax expense (benefit) from discontinued operations, the expense (benefit) for income taxes consists of the following:

in millions of €

2009

2008

2007Income tax expense from continuing operations


346


1,091


4,326Income tax expense (benefit) from discontinued operations





(93
)

(273
)Income tax expense (benefit) recorded in other reserves


(60
)

(240
)

(151
)Income tax expense (benefit) for deduction in excess of remuneration expense for equity-settled employee stock option plans





25


(146
)286


783


3,756


The valuation allowances relate to deferred tax assets of foreign companies and  although additional valuation allowances were
accounted for affecting net profit  decreased in the statement of financial position by €414 million from December 31, 2008 to December 31,
2009. This is a result of the neutral shortfall of deferred tax assets, which were subject to a valuation allowance due to the total Chrysler disinvestment. Furthermore, the valuation allowance
decreased neutrally due to currency translation effects. At December 31, 2009, the valuation allowance on deferred tax assets relates, among other things, to capital losses amounting to
€824 million which will expire in 2014, to corporate tax net operating losses amounting to €934 million, and to tax credit carryforwards amounting to
€677 million. Of the total amount of deferred tax assets adjusted by a valuation allowance, deferred tax assets for corporate tax net operating losses amounting to
€2 million expire in 2010, €145 million expire in 2011, €191 million expire in 2012, €162 million expire in
2013, €219 million expire at various dates from 2014 through 2016, €138 million expire at various dates from 2017 through 2029 and
€77 million can be carried forward indefinitely. Deferred tax assets for tax credit carryforwards amounting to €116 million expire at various dates from
2014 through 2019, €31 million expire in 2029 and €530 million can be carried forward indefinitely. Furthermore, the valuation allowance primarily relates
to temporary differences and net operating losses for state and local taxes at the US companies. Daimler believes that it is more likely than not

F-32

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

that
those deferred tax assets cannot be utilized. In 2009 and prior years, the Group had taxable losses in several subsidiaries in some countries. After offsetting the deferred tax assets with
deferred tax liabilities, the deferred tax assets not subject to valuation allowances amounted to €1,065 million for those foreign subsidiaries. Daimler believes it is more
likely than not that due to future taxable income, deferred tax assets which are not subject to valuation allowances can be utilized. In future periods Daimler's estimate of the amount of deferred tax
assets that are considered realizable may change, and hence the valuation allowances may increase or decrease.

Daimler
recorded deferred tax liabilities for German tax of €46 million (2008: €48 million) on €3,082 million (2008:
€3,190 million) in cumulative undistributed earnings of non-German subsidiaries 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 recognize deferred tax liabilities on retained earnings of non-German subsidiaries of €6,413 million (2008:
€10,773 million) because these earnings are intended to be indefinitely reinvested in those operations. If the dividends are paid out, an amount of 5% of the dividends will be
taxed under the German taxation rules and, if applicable, with non-German withholding tax. Additionally, income tax consequences could arise if the dividends first had to be distributed by
a non-German subsidiary to a non-German holding company. Normally, the distribution would lead to an additional income tax expense. It is not practicable to estimate the amount
of taxable temporary differences for these undistributed foreign earnings.

The
Group has various unresolved issues concerning open income tax years with the tax authorities in a number of jurisdictions. Daimler believes that it has recognized adequate
provisions for any future income taxes that may be owed for all open tax years.

F-33

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

9. Intangible assets

Intangible assets developed as follows:

in millions of €

Goodwill
(acquired)

Development
costs
(internally
generated)

Other
intangible
assets
(acquired)

TotalAcquisition or manufacturing costsBalance at January 1, 2008


946


7,333


2,495


10,774Additions due to business combinations











Other additions





1,387


273


1,660Reclassifications











Disposals





(1,085
)

(795
)

(1,880
)Other changes1


(53
)

29


154


130Balance at December 31, 2008


893


7,664


2,127


10,684Additions due to business combinations








58


58Other additions





1,286


140


1,426Reclassifications











Disposals





(1,015
)

(321
)

(1,336
)Other changes1


32


(1
)

(21
)

10Balance at December 31, 2009


925


7,934


1,983


10,842AmortizationBalance at January 1, 2008


253


3,370


1,949


5,572Additions





638


208


846Reclassifications











Disposals





(1,081
)

(789
)

(1,870
)Other changes1


(20
)

21


22


23Balance at December 31, 2008


233


2,948


1,390


4,571Additions





647


181


828Reclassifications











Disposals





(1,014
)

(285
)

(1,299
)Other changes1


(2
)




(9
)

(11
)Balance at December 31, 2009


231


2,581


1,277


4,089Carrying amount at December 31, 2008


660


4,716


737


6,113Carrying amount at December 31, 2009


694


5,353


706


6,753


1Primarily
changes from currency translation.


F-34

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

At December 31, 2009, goodwill of €388 million (2008: €367 million) relates to the Daimler
Trucks segment and €189 million (2008: €180 million) relates to the Mercedes-Benz Cars segment.

Non-amortizable
intangible assets are primarily comprised of goodwill and development costs for projects which have not yet been completed (carrying amount at
December 31, 2009: €2,753 million; carrying amount at December 31, 2008: €2,580 million). In addition, other intangible assets with a
carrying amount at December 31, 2009 of €137 million (2008: €143 million) are not amortizable. Other non-amortizable intangible assets
mainly comprise trademarks, which relate to the Daimler Trucks segment and can be utilized without restrictions.

The
total amortization expense for intangible assets is included in the consolidated statement of income (loss) in the following line items:

in millions of €

2009

2008

2007Cost of sales


735


759


880Selling expenses


39


36


37General administrative expenses


50


47


50Research and non-capitalized development costs


4


4


5Net profit (loss) from discontinued operations








106828


846


1,078


F-35

---





DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

10. Property, plant and equipment

Property, plant and equipment developed as follows:

in millions of €

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

Technical
equipment
and machinery

Other
equipment,
factory
and office
equipment

Advance payments
relating to plant
and equipment
and construction
in progress

TotalAcquisition or manufacturing costsBalance at January 1, 2008


12,668


17,554


14,133


1,305


45,660Additions due to business combinations














Other additions


296


927


1,281


1,083


3,587Reclassifications


309


591


330


(1,230
)

Disposals


(70
)

(368
)

(393
)

(38
)

(869
)Other changes1


(41
)

(164
)

62


13


(130
)Balance at December 31, 2008


13,162


18,540


15,413


1,133


48,248Additions due to business combinations


15


15


2





32Other additions


146


551


845


913


2,455Reclassifications


241


208


484


(933
)

Disposals


(130
)

(482
)

(765
)

(92
)

(1,469
)Other changes1


62


130


139


11


342Balance at December 31, 2009


13,496


18,962


16,118


1,032


49,608DepreciationBalance at January 1, 2008


7,015


13,429


10,548


18


31,010Additions


276


621


1,274


5


2,176Reclassifications


68


(27
)

(41
)




Disposals


(38
)

(336
)

(324
)




(698
)Other changes1


(182
)

(192
)

52


(5
)

(327
)Balance at December 31, 2008


7,139


13,495


11,509


18


32,161Additions


289


725


1,422





2,436Reclassifications


3


(95
)

92





Disposals


(87
)

(445
)

(677
)




(1,209
)Other changes1


60


100


90


5


255Balance at December 31, 2009


7,404


13,780


12,436


23


33,643Carrying amount at December 31, 2008


6,023


5,045


3,904


1,115


16,087Carrying amount at December 31, 2009


6,092


5,182


3,682


1,009


15,965


1Primarily
changes from currency translation.


Property, plant and equipment include buildings, technical equipment and other equipment capitalized under finance lease arrangements with a
carrying amount of €350 million (2008: €411 million). In 2009, depreciation expense on assets under finance lease arrangements amounted to
€72 million (2008: €73 million; 2007: €61 million).

F-36

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

11. Equipment on operating leases

Equipment on operating leases developed as follows:

in millions of €Acquisition or manufacturing costsBalance at January 1, 2008


25,629Additions due to business combinations


Other additions


10,158Reclassifications


Disposals


(10,655
)Other changes1


(204
)Balance at December 31, 2008


24,928Additions due to business combinations


Other additions


10,759Reclassifications


Disposals


(11,162
)Other changes1


(23
)Balance at December 31, 2009


24,502DepreciationBalance at January 1, 2008


5,991Additions


3,553Reclassifications


Disposals


(3,523
)Other changes1


235Balance at December 31, 2008


6,256Additions


3,450Reclassifications


Disposals


(3,723
)Other changes1


(13
)Balance at December 31, 2009


5,970Carrying amount at December 31, 2008


18,672Carrying amount at December 31, 2009


18,532


1Primarily
changes from currency translation.


The additions of 2009 already include existing lease contracts, formerly accounted for as receivables from financial services, with a carrying
amount of €1.2 billion, which have to be accounted for as equipment from operating leases due to a modified risk sharing agreement between Daimler and independent dealers. This
modification resulted in a pre-tax expense of €79 million at the Mercedes-Benz Cars segment.

As
of December 31, 2009, equipment on operating leases with a carrying amount of €643 million is pledged as security for liabilities from ABS transactions
which are related to a securitization transaction of future lease payments on operating leases and related vehicles (see also Note 23).

In
2008, as a result of lower estimated residual values of leased vehicles the Group recorded impairment charges of €465 million in cost of sales and allocated
these charges to the Mercedes-Benz Cars segment.

F-37

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

The
impairment charges are included in the line item "Other additions" within "Depreciation" in the 2008 table above.

Minimum lease payments.Non-cancelable future lease payments to Daimler for equipment on operating leases are due
as follows:

At December 31,in millions of €

2009

2008Maturitywithin one year


3,550


3,682between one and five years


3,842


3,670later than 5 years


155


537,547


7,405


12. Investments accounted for using the equity method

Key financial figures of investments accounted for using the equity method are as follows:

in millions of €

EADS

Chrysler

Tognum

Kamaz

Others1

TotalDecember 31, 2009Equity interest (in %)


22.5





28.4


10.0





Market value (based on listed share prices)


2,583





433


105





Equity investment


3,112





671


87


425


4,295Equity result (2009)2


88





(9
)

(7
)




72December 31, 2008Equity interest (in %)


22.5


19.9


28.4


10.0





Market value (based on listed share prices)


2,206





336


38





Equity investment


2,886





706


98


559


4,249Equity result (2008)2


307


(1,390
)

(1
)




86


(998
)2007Equity result2


1,465


(377
)







(35
)

1,053


1Also
including joint ventures accounted for using the equity method.2Including
investor-level adjustments. The results for EADS for 2008 and 2007 include realized gains of €130 million and €1,452 million,
respectively, in connection with the transfer of equity interests in EADS. In addition, for 2007 and regarding EADS, an unrealized gain of €121 million resulting from the
mark-to-market valuation of derivative financial instruments in connection with EADS shares is included in other financial income (expense), net.


F-38

---





DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

The following table presents summarized IFRS financial information on investments accounted for using the equity method, which was the basis for applying the
equity method in the Group's consolidated financial statements:

in millions of €

EADS

Chrysler

Tognum

Kamaz

Others1

TotalIncome statement information22009Sales


43,478





2,594


960


2,409


49,441Net profit (loss)


711





101


(51
)

18


7792008Sales


40,659


48,442


3,094


2,646


2,647


97,488Net profit (loss)


1,176


(6,541
)

218


29


62


(5,056
)2007Sales


39,614


7,967








1,660


49,241Net profit (loss)


(1
)

(1,942
)







(105
)

(2,048
)Balance sheet information32009Total assets


73,889





2,407


1,738


2,835


80,869Equity


13,706





632


723


1,060


16,121Liabilities


60,183





1,775


1,015


1,775


64,7482008Total assets


73,071


81,506


2,606


1,897


3,356


162,436Equity


12,690


(3,430
)

622


811


1,120


11,813Liabilities


60,381


84,936


1,984


1,086


2,236


150,623


1Also
including joint ventures accounted for using the equity method.2Figures
of EADS, Chrysler and Tognum generally relate to the period from October 1 to September 30. Figures of Kamaz for 2009 relate to the period from January 1 to
September 30 and for 2008 to the period from January 1 to December 31. Figures of Chrysler for 2007 relate to the period from August 4 to September 30; figures of
Chrysler for 2008 and 2007 were adjusted for significant transactions and events during the fourth quarter.3Figures
of EADS, Chrysler, Tognum and Kamaz generally as of September 30. For 2008, figures of Kamaz as of December 31. Figures of Chrysler for 2008 were adjusted for
significant transactions and events during the fourth quarter.


EADS.The Group reports its investment in and its proportionate share in the results of the European Aeronautic Defence and Space
Company
EADS N.V. (EADS) in the reconciliation of total segments' assets to Group assets and total segments' EBIT to Group EBIT, respectively, in the segment reporting.

On
July 7, 2004, Daimler entered into a securities lending agreement with Deutsche Bank AG concerning an approximate 3% equity interest in EADS shares. The securities lending had
several tranches with terms ranging between three and four years. As collateral, Daimler received a lien on a securities account of equivalent value to the shares loaned by Daimler. Simultaneously,
the Group also entered into option contracts based on EADS shares which provided it with the rights to sell these EADS shares between October 2007 and October 2008 at a fixed strike price but gave the
counterparty the right to participate in increases in the share price above a certain higher threshold while obtaining protection against a decrease in the share price below a minimum amount per
share. In the fourth quarter of 2007, the Group started to exercise its option contracts and irrevocably transferred an approximately 1% equity interest in EADS to third parties in that period. From
this transaction, Daimler achieved a gain of €35 million before income taxes. In 2008, the Group exercised all remaining option rights and irrevocably

F-39

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

transferred
an equity interest of approximately 2% in EADS to third parties. From these transactions, Daimler realized a gain of €130 million before income taxes.

In
addition, on April 4, 2006, Daimler entered into a forward transaction with several financial institutions pertaining to a 7.5% interest in EADS. Simultaneously, Daimler
entered into a securities lending agreement with those financial institutions for the same number of shares of EADS. As collateral, Daimler received a lien on a securities account of equivalent value
to the shares loaned by Daimler. In January 2007, Daimler settled the forward transaction by transferring its 7.5% interest in EADS for cash proceeds of €1,994 million and
realized a gain of €762 million before income taxes (including a gain from the realization of derivatives of €49 million).

The
transactions contracted in July 2004 and April 2006 reduced the Group's legal ownership in EADS to 22.5%. Until the respective settlements of the transactions (the forward
transaction in January 2007 with respect to a 7.5% equity interest in EADS and the exercise of the option rights, beginning in the fourth quarter of 2007, with respect to an approximate 3% equity
interest in EADS), however, the original transactions did not meet the criteria of a sale. Therefore, for the period up to derecognition, the Group carried the EADS shares underlying these
transactions as an investment on the statement of financial position. Accordingly, Daimler's share in the results of EADS in 2008 was based on an equity interest which declined during the year from
24.9% at the beginning of the year to 22.5% at year end. For 2007, Daimler's share in the results of EADS was based on an equity interest which declined from 33% at the beginning of the year to 24.9%
at year end.

We
accounted for all derivatives relating to EADS shares as derivative financial instruments with changes in fair value subsequent to initial measurement through the settlement of the
respective contracts recognized in other financial income (expense), net. In 2007, the mark-to-market valuation of these derivatives resulted in unrealized gains of
€72 million.

On
March 13, 2007, a subsidiary of Daimler which holds Daimler's 22.5% interest in EADS issued equity interests to investors in exchange for €1,554 million
of cash, resulting in a gain of €704 million before income taxes in 2007. The newly issued equity interest can be converted by Daimler on or after July 1, 2010 into a
7.5% interest in EADS or into cash equal to the then fair value of that interest in EADS. This transaction did not reduce Daimler's equity interest in EADS on which the Group bases its equity-method
accounting. As a result of this transaction, the Group reports a minority interest in its consolidated statement of financial position representing the investor's ownership in the consolidated
subsidiary that issued the equity interest. The amount reported as minority interest reflects the investor's 33% share in the net assets of that subsidiary.

Chrysler.As of December 31, 2008, the carrying amount of the Group's equity interest in Chrysler Holding and the carrying
amounts of the
subordinated loans granted to Chrysler were reduced to zero. As a result, until the redemption of the remaining 19.9% equity interest in Chrysler Holding on June 3, 2009, the equity-method
accounting of the Group's remaining equity interest in Chrysler Holding did not result in a further impact on Daimler's EBIT (see also Note 2).

In
2008, the Group recorded its proportionate share in the 2008 loss of Chrysler which exceeded the carrying amount of its equity investment in Chrysler as a reduction of the carrying
amounts of the subordinated loans granted to Chrysler. The equity results for 2008 and 2007 are based on financial information of Chrysler as of September 30, included with a three-month time
lag and adjusted for significant transactions and events that occurred between September 30 and the Group's reporting date of December 31. The adjustments made in 2008 include expenses
of €109 million relating to restructuring measures initiated at Chrysler. In 2007, the adjustments comprised expenses of €322 million related to
restructuring measures at Chrysler and a new agreement Chrysler reached with the US trade union, UAW. The Group's proportionate shares in the losses of Chrysler for 2008 and 2007 are included in the
reconciliation of total segments' EBIT to Group EBIT in the

F-40

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

segment
reporting. For 2007, the Group's investment in Chrysler is recognized in the reconciliation of total segments' assets to Group assets.

The
rights retained by the Group in connection with the transfer of the majority interest in Chrysler, which were contingent upon the residual values of leased vehicles and certain other
events, were impaired in 2008 because of an expected decline in the fair value of the financial asset. In addition, due to the significant financial difficulties at Chrysler in the fourth quarter of
2008, the Group determined that objective evidence existed that the carrying amount of loans and receivables due from Chrysler and certain other assets was impaired. The total impairments recognized
in 2008 amounted to €1.8 billion and are primarily recorded in "Other financial income (expense), net." In the segment reporting, these impairment charges are included in the
reconciliation of total segments' EBIT to Group EBIT.

Tognum.The Group reports its investment and its proportionate share in the results of Tognum in the reconciliation of total
segments' assets to
Group assets and total segments' EBIT to Group EBIT, respectively, in the segment reporting.

Kamaz.In December 2008, as a part of a strategic partnership, the Group acquired a 10% stake in the Russian commercial vehicle
manufacturer Kamaz
OAO (Kamaz). Resulting from its representation on Kamaz's board of directors and its significant contractual rights under the terms of a shareholder agreement, the Group can exercise significant
influence on Kamaz. Therefore, the Group accounts for its equity interest in Kamaz using the equity method; the investment and the proportionate share in the results of Kamaz are allocated to the
Daimler Trucks segment.

13. Receivables from financial services

Receivables from financial services are comprised of the following:

At December 31, 2009

At December 31, 2008in millions of €

Current

Non-current

Total

Current

Non-current

TotalReceivables fromRetail


11,835


20,772


32,607


11,533


21,759


33,292Wholesale


4,808


1,001


5,809


6,087


1,054


7,141Other


125


1,105


1,230


95


2,793


2,888Gross carrying amount


16,768


22,878


39,646


17,715


25,606


43,321Allowances for doubtful accounts


(540
)

(628
)

(1,168
)

(331
)

(603
)

(934
)Carrying amount, net


16,228


22,250


38,478


17,384


25,003


42,387


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 Daimler.

Wholesale
receivables represent loans for floor financing programs for vehicles sold by the Group's automotive businesses to dealers or loans for assets purchased by dealers from third
parties, primarily used vehicles traded in by dealers' customer or real estate such as dealer showrooms.

Other
receivables mainly represent non-automotive assets from contracts of the financial services business with third parties.

In
2009, a risk sharing agreement between Daimler and its independent dealers in connection with residual values was modified, which also affected existing lease contracts accounted for
as finance leases and shown under retail receivables. Due to these contractual changes, the affected lease contracts were reclassified as operating

F-41

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

leases.
In consequence, these lease contracts with a carrying amount of €1.2 billion are reported under equipment on operating leases.

All
cash flow effects attributable to receivables from financial services are presented within cash provided by (used for) operating activities in the consolidated statement of cash
flows.

Allowances.Changes in the allowance account for receivables from financial services were as follows:

in millions of €

2009

2008

2007Balance at January 1


934


594


924Charged to costs and expenses


850


712


457Amounts written off


(446
)

(237
)

(321
)Reversals


(165
)

(131
)

(153
)Disposal of Chrysler activities








(310
)Currency translation and other changes


(5
)

(4
)

(3
)Balance at December 31


1,168


934


594


The
total expense relating to impairment losses on receivables from financial services amounted to €853 million (2008: €730 million; 2007:
€487 million).

Credit risks.The following chart gives an overview of credit risks included in receivables from financial services:

At December 31,in millions of €

2009

2008Receivables, neither past due nor impaired individually


35,270


39,027Receivables past due, not impaired individually less than 30 days


1,219


1,45830 to 59 days


442


44360 to 89 days


121


12790 to 119 days


78


59120 days or more


184


127Total


2,044


2,214Receivables impaired individually


1,164


1,146Carrying amount, net


38,478


42,387


Receivables
not subject to an individual impairment assessment are grouped and subject to collective impairment allowances to cover credit losses.

The
carrying amount of receivables from financial services of which the terms have been renegotiated and that would other-wise be past due or impaired as of
December 31, 2009 was €135 million (2008: €222 million).

Further
information on financial risks and nature of risks is provided in Note 30.

Finance leases.Finance leases consist of sales-types leases of vehicles to the Group's direct retail customers and of
direct-financing leases of
vehicles to customers of the Group's independent dealers including leveraged leases of non-automotive assets to third parties.

F-42

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Maturities
of the finance lease contracts are comprised as follows:

At December 31, 2009

At December 31, 2008in millions of €

< 1 year

1 year up to
5 years

> 5 years

Total

< 1 year

1 year up to
5 years

> 5 years

TotalContractual future lease payments


4,650


7,114


1,869


13,633


5,153


9,825


3,824


18,802Unguaranteed residual values


193


322


147


662


122


331


260


713Gross investment


4,843


7,436


2,016


14,295


5,275


10,156


4,084


19,515Unearned finance income


(621
)

(1,168
)

(334
)

(2,123
)

(730
)

(1,626
)

(1,325
)

(3,681
)Gross carrying amount


4,222


6,268


1,682


12,172


4,545


8,530


2,759


15,834Allowances for doubtful accounts


(191
)

(284
)

(6
)

(481
)

(135
)

(393
)

(4
)

(532
)Carrying amount, net


4,031


5,984


1,676


11,691


4,410


8,137


2,755


15,302


Leveraged leases.Leveraged leases which are included in the above table also involve those leveraged lease arrangements which
are recorded net of
non-recourse debt. Revenue is recognized based on the effective interest method using the implicit rate of return that considers the net cash flows underlying the transactions.

In
2009, a number of assets under these leverage lease contracts were sold. The sales were combined with a before maturity termination of the lease contracts (see Note 2). In
addition, investments under selected leveraged lease contracts with a fair value less costs to sell of €310 million were recorded under assets held for sale (see
Note 18).

The
remaining investments in leveraged leases shown in the receivables of financial services consist of a sewage treatment plant and railroad rolling stock; the contractual maturities
range from 30 to 32 years. The carrying amount of leveraged leases as of December 31, 2009 and December 31, 2008 was €169 million and
€1,304 million, respectively. Daimler recognized income of €5 million (2008: €36 million; 2007:
€38 million) relating to these transactions, which is included in revenue.

Sale of receivables.Based on market conditions and liquidity needs, Daimler may sell portfolios of retail and wholesale
receivables to third parties
(i.e. special purpose entities). At the time of the sale, Daimler determines whether the legally transferred receivables meet the criteria for derecognition in conformity with the appropriate
provisions. If the criteria are not met, the receivables continue to be recognized in the Group's consolidated statement of financial position.

As
of December 31, 2009, the carrying amount of receivables from financial services sold but not derecognized for accounting purposes amounted to
€1,006 million (2008: €697 million). The associated risks and rewards are similar to those with respect to receivables from financial services that have
not been transferred. For information on the related total liabilities associated with these receivables sold but not derecognized, see Note 23.

F-43

---





DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

14. Other financial assets

The item "other financial assets" shown in the consolidated statement of financial position is comprised of the following classes:

At December 31, 2009

At December 31, 2008in millions of €

Current

Non-current

Total

Current

Non-current

TotalAvailable-for-sale financial assets


5,118


2,308


7,426


711


847


1,558Thereof equity instruments





1,084


1,084





744


744Thereof debt instruments


5,118


1,224


6,342


711


103


814Derivative financial instruments used in hedge accounting


474


600


1,074


1,105


879


1,984Financial assets at fair value through profit or loss


504


714


1,218


1,233


1,132


2,365Other receivables and financial assets


1,364


395


1,759


1,669


420


2,0897,460


4,017


11,477


4,718


3,278


7,996


Investments
included in the table above, primarily debt securities, with a carrying amount of €6,342 million in 2009 (2008: €1,091 million)
form part of the Group's liquidity management function.

Available-for-sale financial assets.Equity instruments are comprised as follows:

At December 31,in millions of €

2009

2008Equity instruments carried at fair value


385


193Equity instruments carried at cost


699


5511,084


744


In
2009, equity instruments carried at cost with a carrying amount of €8 million (2008: €35 million; 2007:
€5 million) were sold. The realized losses from the sales were €7 million in 2009 (2008: gains of €12 million; 2007: gains of
€90 million). As of December 31, 2009, the Group did not intend to dispose of any reported equity instruments carried at cost.

Financial assets at fair value through profit or losscomprise the following:

At December 31,in millions of €

2009

2008Trading securities





277Derivative financial instruments not used in hedge accounting


1,218


2,0881,218


2,365


Derivatives.For information on derivatives see Note 29.

F-44

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

15. Other assets

The remaining non-financial assets are comprised as follows:

At December 31, 2009

At December 31, 2008in millions of €

Current

Non-current

Total

Current

Non-current

TotalReimbursements due to income tax refunds


584


176


760


411


268


679Reimbursements due to other tax refunds


989


20


1.009


1,241


14


1,255Reimbursements due to the Medicare Act (USA)





122


122





119


119Other expected reimbursements


385


14


399


404


34


438Prepaid expenses


225


52


277


289


61


350Others


169


112


281


226


110


3362,352


496


2,848


2,571


606


3,177


Other
expected reimbursements predominantly relate to recovery claims from our suppliers in connection with issued product warranties.

16. Inventories

At December 31,in millions of €

2009

2008Raw materials and manufacturing supplies


1,517


1,725Work-in-process


1,626


1,880Finished goods, parts and products held for resale


9,666


13,066Advance payments to suppliers


36


13412,845


16,805


The
amount of write-down of inventories to net realizable value recognized as expense in cost of sales was €299 million in 2009 (2008:
€245 million; 2007: €111 million). The reversals of write-down on inventories were €7 million in 2009 (2008:
€5 million; 2007: €12 million). At December 31, 2009, €1,482 million (2008: €1,894 million) of the
total inventories were carried at net realizable value. Inventories that are expected to be turned over after more than twelve months amounted to €634 million at
December 31, 2009 (2008: €583 million) and are primarily spare parts.

Based
on the requirement to provide collateral for certain vested employee benefits in Germany, the value of company cars included in inventories at Daimler AG in an amount of
€457 million (2008: €464 million) was pledged as collateral to the Daimler Pension Trust e.V.

The
carrying amount of inventories recognized during the period by taking possession of collateral held as security amounted to €136 million in 2009 (2008:
€102 million). The utilization of these assets occurs in the context of normal business cycle.

F-45

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

17. Trade receivables

At December 31,in millions of €

2009

2008Gross carrying amount


5,675


7,619Allowances for doubtful accounts


(390
)

(620
)Carrying amount, net


5,285


6,999


As
of December 31, 2009, €8 million of the trade receivables mature after more than one year (2008: €26 million).

Allowances.Changes in the allowance account for trade receivables were as follows:

in millions of €

2009

2008

2007Balance at January 1


620


377


476Charged to costs and expenses


50


280


12Amounts written off


(281
)

(42
)

(78
)Disposal of Chrysler activities








(22
)Currency translation and other changes


1


5


(11
)Balance at December 31


390


620


377


The
total expenses relating to the impairment losses of trade receivables amounted to €186 million (2008: €282 million; 2007:
€126 million).

Credit risks.The following chart gives an overview of credit risks included in trade receivables:

At December 31,in millions of €

2009

2008Receivables neither past due nor impaired individually


3,026


4,162Receivables past due, not impaired individuallyless than 30 days


512


66030 to 59 days


110


17460 to 89 days


62


6290 to 119 days


34


54120 days or more


394


226Total


1,112


1,176Receivables impaired individually


1,147


1,661Carrying amount, net


5,285


6,999


Receivables
not subject to an individual impairment assessment are grouped and subject to collective impairment allowances to cover credit losses.

The
carrying amount of trade receivables, of which the terms have been renegotiated and that would otherwise be past due or impaired as of December 31, 2009 was
€14 million (2008: €73 million).

Further
information on financial risk and nature of risks is provided in Note 30.

F-46

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Sale of receivables.Based on market conditions and liquidity needs, Daimler may sell portfolios of trade receivables to third
parties. At the time
of the sale, Daimler determines whether the legally transferred receivables meet the criteria for derecognition in conformity with the appropriate provisions. If the criteria are not met, the
receivables continue to be recognized in the Group's consolidated statement of financial position.

As
of December 31, 2009, the carrying amount of trade receivables sold, but not derecognized for accounting purposes amounted to €38 million (2008:
€67 million). For information on the liabilities related to sold but not derecognized receivables, see Note 23.

18. Assets held for sale from non-automotive leasing portfolios

As of December 31, 2009, non-automotive assets subject to leveraged leases are presented separately as assets held
for sale in the consolidated statement of financial position. The carrying amount of these assets amounted to €310 million at December 31, 2009. The major part of these
assets was sold in the first two months of 2010. Prior to the classification as assets held for sale, the leveraged lease contracts were included in receivables from financial services. For further
information, see Notes 2 and 13.

19. Equity

See also the consolidated statements of changes in equity.

The
share stock is divided into no-par value shares. All shares are fully paid up. Each share grants one vote at the Annual Meeting of Daimler AG and, if applicable except
for new shares potentially not entitled to dividend, an equal portion of the profits as defined by the dividend distribution resolved at the Annual Meeting.

in millions of shares

2009

2008Shares outstanding on January 1


927


1,014Reacquired shares not cancelled (share buy-back program) previous years


37


Shares issued on January 1


964


1,014Creation of new shares by exercise of stock options


1


Reacquired and cancelled shares (share buy-back program)





(50
)Creation of new shares by capital increase


96


Shares issued on December 31


1,061


964Reacquired shares not cancelled (share buy-back program)


(37
)

(37
)Shares outstanding on December 31


1,024


927


Treasury shares.In 2009, Daimler neither purchased nor reissued Daimler shares to employees in connection with an employee
share purchase plan. In
2008 1.5 million (2007: 0.5 million) Daimler shares were purchased and reissued to employees.

Share buy-back program.By resolution of the Annual Meeting on April 4, 2007 Daimler was authorized to acquire, until
October 4, 2008,
treasury shares for certain predefined purposes, i. e. for the purpose of cancellation and to meet the subscription rights arising from stock option programs, up to an amount of
€267 million of the share capital, or nearly 10% of the share capital as of that date. Between August 30, 2007 and March 28, 2008, Daimler AG exercised this
authorization by repurchasing a total of 99.8 million shares in 2007 and 2008 (49.8 million of which after December 31, 2007 between February 14, 2008 and March 28,
2008) representing €267 million of the share capital as of the time of the resolution of the Annual Meeting in 2007, equivalent to 10%, for a total consideration of
€6,197 million (€2,717 million of which for the shares repurchased after December 31,

F-47

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

2007).
By way of cancellation of 49.8 million repurchased shares without any reduction of the share capital with effect as of the end of April 3, 2008, the amount of share capital
attributable to one share increased from approximately €2.73 to approximately €2.87.

On
April 9, 2008, the Annual Meeting authorized Daimler AG to acquire, until October 9, 2009, treasury shares for certain predefined purposes, i. e. for the purpose of
cancellation and to meet the subscription rights arising from stock option programs, up to 10% of the share capital in the amount of €2,766 million issued as of the day of the
resolution. Between June 18, 2008 and October 23, 2008, Daimler AG partly exercised the authorization by repurchasing a total of 37.3 million shares representing approximately
€107 million of the share capital as of the time of the Annual Meeting, equivalent to approximately 3.87%, for a total consideration of €1,449 million. In
2008 0.2 million shares repurchased were used to meet subscription rights arising from stock option programs.

Insofar
as the resolution issued by the Annual Meeting on April 9, 2008 authorizing Daimler AG to acquire, until October 9, 2009, treasury shares for certain predefined
purposes up to 10% of the share capital as of the day of the resolution had not been utilized, it was terminated by resolution of the Annual Meeting on April 8, 2009. Simultaneously, Daimler
was again authorized to acquire, until October 8, 2010, treasury shares for certain predefined purposes, i. e. for the purpose of cancellation and to meet subscription rights
arising from stock option programs, up to 10% of the share capital as of date of that resolution.

Through
a final verdict reached by the higher regional court in Frankfurt am Main in November 2009, the exchange ratio specified in the domination and profit and loss transfer agreement
of 1988 between the former Daimler-Benz AG and AEG AG, was specified from five AEG shares for one old Daimler-Benz share to a ratio of 2.9 to 1. Accordingly, the compensation
payment for unpaid AEG dividends determined in the domination and profit and loss transfer agreement was increased from a rate of 20% to 34.5% of the respective Daimler dividends. From today's
perspective, this verdict will result in an obligation for Daimler to supply a maximum of approximately 4.3 million Daimler shares and a maximum of approximately
€150 million in cash.

For
compensation of these obligations, Daimler intends to use parts of the stock of repurchased and not cancelled shares from the 2008 share buy-back program.

As
of December 31, 2009, 37.1 million treasury shares repurchased under the resolution issued at the Annual Meeting on April 9, 2008 are still held by Daimler AG.

Authorized capital.By way of a resolution adopted at the Annual Meeting on April 9, 2008, the Board of Management was
authorized, with the
consent of the Supervisory Board, to increase Daimler AG's share capital in the period until April 8, 2013 by a total of €500 million by issuing new registered no par
value shares in exchange for cash contributions and by a total of €500 million by issuing new registered no par value shares in exchange for non-cash contributions
(Authorized Capital I and II). The Board of Management was also authorized with the consent of the Supervisory Board to exclude shareholders' subscription rights under certain conditions. Under
partial utilization of the authorized capital, the Board of Management decided, with the consent of the Supervisory Board of March 22, 2009, to increase Daimler AG's share capital of
€2,768 million by €276 million to €3,044 million in exchange for cash contributions, excluding any shareholders' subscription
rights, by issuing 96.4 million new registered no par value shares at an issue price of €20.27 per share to Semare Beteiligungsverwaltungsgesellschaft mbH. Semare
Beteiligungsverwaltungsgesellschaft mbH is an indirect subsidiary of Aabar Investments PJSC (Aabar), Abu Dhabi. The capital increase became effective upon entry in the Commercial Register
("Handelsregister") on March 24, 2009. Resulting transaction costs of €7 million (net of taxes) were deducted from capital reserves. The new shares are entitled to
dividends for the first time for the financial year beginning on January 1, 2009.

The
Annual Meeting on April 8, 2009 authorized the Board of Management again, with the consent of the Supervisory Board, to increase Daimler AG's share capital in the period until
April 7, 2014 by a total of €

F-48

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

1,000 million
in one lump sum or by separate partial amounts at different times by issuing new, registered no par value shares in exchange for cash and/or non-cash contributions
(Approved Capital 2009). Among other things, the Board of Management was authorized with the consent of the Supervisory Board to exclude shareholders' subscription rights under certain conditions. In
this context, the Annual Meeting further resolved to cancel the former Authorized Capital I and II with effect as of the time when the new Approved Capital 2009 becomes effective, but only to the
extent that it had not been utilized. The new Approved Capital 2009 and the cancellation of the remaining former Authorized Capital I and II came into effect with their entry in the Commercial
Register on June 5, 2009.

Conditional capital.By way of a resolution adopted at the Annual Meeting on April 6, 2005, the Board of Management was
authorized, with the
consent of the Supervisory Board, to issue convertible bonds and/or
option notes with warrants with a total face value of up to €15 billion at terms not exceeding 20 years and to grant the bearers or creditors of these bonds convertible
or option rights to new Daimler shares with an allocable portion of the share capital of up to €300 million, in line with the specified conditions, by April 5, 2010. This
authorization has not yet been exercised.

Stock option plans.As of December 31, 2009, 22 million options from stock option plans with a nominal amount of
€64 million had not yet been exercised.

The
table below shows the changes in other reserves directly recognized in equity:

2009

2008

2007in millions of €

Before
taxes

Taxes

Net of
taxes

Before
taxes

Taxes

Net of
taxes

Before
taxes

Taxes

Net of
taxesUnrealized gains (losses) from currency translation adjustments


267





267


(32
)




(32
)

(790
)




(790
)Financial assets available for saleUnrealized gains (losses)


255


(8
)

247


(287
)

13


(274
)

(93
)

14


(79
)(Income) expense reclassified through profit or loss




















(6
)

2


(4
)Unrealized gains (losses) from financial assets available for sale


255


(8
)

247


(287
)

13


(274
)

(99
)

16


(83
)Derivative financial instrumentsUnrealized gains (losses)


(17
)

54


37


473


(114
)

359


1,215


(389
)

826(Income) expense reclassified through profit or loss


(414
)

69


(345
)

(542
)

129


(413
)

(533
)

212


(321
)Unrealized gains (losses) from derivative financial instruments


(431
)

123


(308
)

(69
)

15


(54
)

682


(177
)

505Investments accounted for using the equity methodUnrealized gains (losses)


441


(116
)

325


(263
)

83


(180
)

645


(153
)

492(Income) expense reclassified through profit or loss


(191
)

61


(130
)

(361
)

129


(232
)

(1,382
)

465


(917
)Unrealized gains (losses) from investments accounted for using the equity method


250


(55
)

195


(624
)

212


(412
)

(737
)

312


(425
)Other comprehensive income (loss)


341


60


401


(1,012
)

240


(772
)

(944
)

151


(793
)


F-49

---





DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

In the line item "Unrealized gains (losses) from investments accounted for using the equity method," the amounts of 2009 include the following components (amounts
attributable to shareholders of Daimler AG only): unrealized gains from currency translation adjustments before taxes and net of taxes of €31 million (2008: unrealized losses
before taxes and net of taxes of €18 million; 2007: unrealized losses before taxes and net of taxes of €22 million), unrealized gains from financial
assets available for sale before taxes of €28 million and net of taxes of €26 million (2008: unrealized gains before taxes of
€35 million and net of taxes of €37 million; 2007: unrealized losses before taxes of €148 million and net of taxes of
€144 million) and unrealized gains from derivative financial instruments before taxes of €42 million and net of taxes of
€27 million (2008: unrealized losses before taxes of €530 and net of taxes of €358 million; 2007: unrealized losses before taxes of
€650 million and net of taxes of €342 million).

The
changes in other reserves directly recognized in equity attributable to minority interest are as follows:

2009

2008

2007in millions of €

Before
taxes

Taxes

Net
of taxes

Before
taxes

Taxes

Net
of taxes

Before
taxes

Taxes

Net
of taxesUnrealized gains (losses) from currency translation adjustments


(7
)




(7
)

43





43


(12
)




(12
)Unrealized gains (losses) from financial assets available for sale











(2
)

1


(1
)

(3
)

1


(2
)Unrealized gains (losses) from investments accounted for using the equity method


148


(38
)

110


(111
)

38


(73
)

83





83Other comprehensive income (loss)


141


(38
)

103


(70
)

39


(31
)

68


1


69


20. Share-based payment

As of December 31, 2009, the Group has the 2006-2009 Performance Phantom Share Plans (PPSP) and the Stock Option
Plans (SOP) outstanding. The Stock Appreciation Rights (SAR) Plan from previous years expired on February 24, 2009 without affecting the consolidated statement of income (loss) in 2009. The
exercisable stock options of 2003 and 2004 are equity-settled share-based payment instruments and are measured at fair value at the date of grant. The PPSP are cash-settled share-based
payment instruments and are measured at their respective fair values at the balance sheet date.

The
PPSP are paid off at the end of the stipulated holding period; earlier, pro-rated payoff is possible only if certain defined conditions are met. The PPSP 2005 was paid
off as planned in the first quarter of 2009.

The
effects of share-based payment arrangements on the consolidated statement of income (loss) and statement of financial position were as follows (before income taxes):

Remuneration
expense/(income)

Provision at
December 31,in millions of €

2009

2008

2007

2009

2008PPSP


31


(75
)

161


72


73MTI








4





SAR





(8
)

39





SOP


1


(18
)

24





32


(101
)

228


72


73


F-50

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Expenses
/ (income) in the consolidated statement of income (loss) resulting from rights of current or former members of the Board of Management are as follows:

Dr. Dieter Zetsche

Wilfried Porth

Andreas Renschlerin millions of €

2009

2008

2007

2009

2008

2007

2009

2008

2007PPSP


1.7


(2.7
)

5.1


0.3








0.7


(1.4
)

2.6SAR





(0.2
)

0.1














.


.SOP


0.1


(4.5
)

3.0

















.




Bodo Uebber

Dr. Thomas Weberin millions of €

2009

2008

2007

2009

2008

2007PPSP


0.8


(1.5
)

2.7


0.7


(1.3
)

2.5SAR





.


.





.


.SOP


0.1


(1.8
)

1.2


0.1


(1.8
)

1.2




Günther Fleig

Dr. Rüdiger Grube

Thomas W. LaSordain millions of €

2009

2008

2007

2009

2008

2007

2009

2008

2007PPSP





(1.3
)

2.5





(1.4
)

2.5








0.9SAR





.


.

















SOP





(2.3
)

1.5





(2.3
)

1.5








.




Eric R. Ridenour

Thomas W. Sidlikin millions of €

2009

2008

2007

2009

2008

2007PPSP








0.6








0.8SAR

















0.1SOP








.








1.5


The
details shown in the overview do not represent any paid or committed remuneration, but refer to income and expense which has been calculated according to IFRS.

Performance Phantom Share Plans.In 2009, the Group adopted a Performance Phantom Share Plan (PPSP), similar to that used 2005
to 2008, under which
eligible employees are granted phantom shares entitling them to receive cash payments after four years. The amount of cash paid to eligible employees is based on the number of vested phantom shares
(determined over a three-year performance period) multiplied by the quoted price of Daimler's ordinary shares (calculated as an average price over a specified period at the end of the four
years of service). The number of phantom shares that vest will depend on the achievement of corporate performance goals, based on competitive and internal benchmarks (return on net assets and return
on sales).

The
Group recognizes a provision for awarding the PPSP. Since payment per vested phantom share depends on the quoted price of one Daimler ordinary share, the quoted price represents the
fair value of each phantom share. The proportionate remuneration expenses for the individual years are determined on the basis of the year-end quoted price of Daimler ordinary shares and
the estimated target achievement.

Stock Option Plans.In April 2000, the Group's shareholders approved the Daimler Stock Option Plan (SOP), which grants stock
options for the purchase
of Daimler ordinary shares to eligible employees. Options granted under the SOP are exercisable at a reference price per Daimler ordinary share, which is determined in advance, plus a 20% premium. The
options become exercisable in equal installments at the earliest on the second and third anniversaries of the date of grant. All unexercised options expire ten years after the date of grant. If the
market price per Daimler ordinary share on the date of exercise is at least 20% higher than the reference price, the

F-51

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

holder
is entitled to receive a cash payment equal to the original exercise premium of 20%. After 2004 no new stock options were granted.

In
the event of exercise, the Group has generally issued ordinary shares so far.

Chrysler
employees are still able to exercise their rights. Employees are allowed to exercise their rights within one year after leaving the Group. For Chrysler employees who had an
active status on August 3, 2007, the possibility to exercise their rights expired on August 3, 2008. Former employees with an inactive status at deconsolidation are allowed to exercise
their rights for a maximum of five years after leaving the Group. Exercises, and therefore the potential issue of new ordinary shares, could cause an increase in the share capital of Daimler, similar
to exercises of stock options by current Daimler employees. As of December 31, 2009, inactive Chrysler employees held 1.8 million exercisable rights.

Due
to the deconsolidation of the Chrysler activities, the outstanding rights for Chrysler employees no longer result in a debt from share-based payment. As of December 31, 2009,
Daimler recorded a provision for Chrysler rights that are not paid off.

The
table below shows the basic terms of the SOP (in millions):

At December 31, 2009Year of grant

Reference
price

Exercise
price

Options
granted

Options
outstanding

Options
exercisable2000

€
62.30

€
74.76


15.2


5.2


5.22001

€
55.80

€
66.96


18.7


5.2


5.22002

€
42.93

€
51.52


20.0


4.2


4.22003

€
28.67

€
34.40


20.5


2.9


2.92004

€
36.31

€
43.57


18.0


4.9


4.9


Options
granted to the Board of Management in 2004 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 a limit in the event of exceptional and unpredictable developments, are measured at their intrinsic values as of December 31.

Analysis
of the stock options issued is as follows:

2009

2008

2007Number of
stock options
in millions

Average
exercise price
€ per share

Number of
stock options
in millions

Average
exercise price
€ per share

Number of
stock options
in millions

Average
exercise price
€ per shareBalance at beginning of the year


24.3


56.61


29.1


57.66


67.1


56.00Options granted

















Exercised


(0.2
)

34.40


(0.6
)

39.11


(35.7
)

53.89Disposals / Forfeited


(1.7
)

60.15


(4.2
)

66.75


(2.3
)

67.97Outstanding at year-end


22.4


56.57


24.3


56.61


29.1


57.66Exercisable at year-end


22.4


56.57


24.3


56.61


29.1


57.66


The
weighted average share price of Daimler ordinary shares during the exercise period was €35.07 (2008: €45.86; 2007: €65.69).

F-52

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Analysis
of the stock options issued to the current members of the Board of Management is as follows:

Dr. Dieter Zetsche

2009

2008

2007Number of
stock options
in millions

Average
exercise price
€ per share

Number of
stock options
in millions

Average
exercise price
€ per share

Number of
stock options
in millions

Average
exercise price
€ per shareBalance at beginning of year


1.0


52.99


1.0


52.99


1.0


52.99Options granted

















Exercised

















Disposals / Forfeited

















Outstanding at year-end


1.0


52.99


1.0


52.99


1.0


52.99Exercisable at year-end


1.0


52.99


1.0


52.99


1.0


52.99Weighted maturity


2.0 years


3.0 years


4.0 years


Wilfried Porth

2009

2008

2007Number of
stock options
in millions

Average
exercise price
€ per share

Number of
stock options
in millions

Average
exercise price
€ per share

Number of
stock options
in millions

Average
exercise price
€ per shareBalance at beginning of year1


.


65.40











Options granted

















Exercised

















Disposals / Forfeited

















Outstanding at year-end1


.


65.40











Exercisable at year-end1


.


65.40











Weighted maturity


1.0 years








1For
number of stock options no disclosure in 2009 due to rounding.


F-53

---





DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Andreas Renschler

2009

2008

2007Number of
stock options
in millions

Average
exercise price
€ per share

Number of
stock options
in millions

Average
exercise price
€ per share

Number of
stock options
in millions

Average
exercise price
€ per shareBalance at beginning of year


0.2


51.88


0.2


51.88


0.2


51.88Options granted

















Exercised

















Disposals / Forfeited

















Outstanding at year-end


0.2


51.88


0.2


51.88


0.2


51.88Exercisable at year-end


0.2


51.88


0.2


51.88


0.2


51.88Weighted maturity


2.2 years


3.2 years


4.2 years


Bodo Uebber

2009

2008

2007Number of
stock options
in millions

Average
exercise price
€ per share

Number of
stock options
in millions

Average
exercise price
€ per share

Number of
stock options
in millions

Average
exercise price
€ per shareBalance at beginning of year


0.1


49.51


0.1


49.51


0.1


49.51Options granted

















Exercised

















Disposals / Forfeited

















Outstanding at year-end


0.1


49.51


0.1


49.51


0.1


49.51Exercisable at year-end


0.1


49.51


0.1


49.51


0.1


49.51Weighted maturity


2.8 years


3.8 years


4.8 years


Dr. Thomas Weber

2009

2008

2007Number of
stock options
in millions

Average
exercise price
€ per share

Number of
stock options
in millions

Average
exercise price
€ per share

Number of
stock options
in millions

Average
exercise price
€ per shareBalance at beginning of year


0.2


43.61


0.2


43.61


0.2


43.61Options granted

















Exercised

















Disposals / Forfeited

















Outstanding at year-end


0.2


43.61


0.2


43.61


0.2


43.61Exercisable at year-end


0.2


43.61


0.2


43.61


0.2


43.61Weighted maturity


2.8 years


3.8 years


4.8 years


F-54

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Analysis
of the stock options issued to the former members of the Board of Management is as follows:

Günther Fleig

2009

2008

2007Number of
stock options
in millions

Average
exercise price
€ per share

Number of
stock options
in millions

Average
exercise price
€ per share

Number of
stock options
in millions

Average
exercise price
€ per shareBalance at beginning of year








0.6


53.88


0.6


53.88Options granted

















Exercised

















Disposals / Forfeited

















Outstanding at year-end








0.6


53.88


0.6


53.88Exercisable at year-end








0.6


53.88


0.6


53.88Weighted maturity





2.9 years


3.9 years


Dr. Rüdiger Grube

2009

2008

2007Number of
stock options
in millions

Average
exercise price
€ per share

Number of
stock options
in millions

Average
exercise price
€ per share

Number of
stock options
in millions

Average
exercise price
€ per shareBalance at beginning of year








0.4


45.66


0.4


45.66Options granted

















Exercised

















Disposals / Forfeited

















Outstanding at year-end








0.4


45.66


0.4


45.66Exercisable at year-end








0.4


45.66


0.4


45.66Weighted maturity





3.6 years


4.6 years


Thomas W. LaSorda

2009

2008

2007Number of
stock options
in millions

Average
exercise price
€ per share

Number of
stock options
in millions

Average
exercise price
€ per share

Number of
stock options
in millions

Average
exercise price
€ per shareBalance at beginning of year














0.2


55.0Options granted

















Exercised

















Disposals / Forfeited

















Outstanding at August 3, 2007














0.2


55.0Exercisable at August 3, 2007














0.2


55.0Weighted maturity








3.9 years


F-55

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Eric R. Ridenour

2009

2008

2007Number of
stock options
in millions

Average
exercise price
€ per share

Number of
stock options
in millions

Average
exercise price
€ per share

Number of
stock options
in millions

Average
exercise price
€ per shareBalance at beginning of year














0.1


50.62Options granted

















Exercised

















Disposals / Forfeited

















Outstanding at August 3, 2007














0.1


50.62Exercisable at August 3, 2007














0.1


50.62Weighted maturity








4.3 years


Thomas W. Sidlik

2009

2008

2007Number of
stock options
in millions

Average
exercise price
€ per share

Number of
stock options
in millions

Average
exercise price
€ per share

Number of
stock options
in millions

Average
exercise price
€ per shareBalance at beginning of year














0.6


56.54Options granted

















Exercised

















Disposals / Forfeited

















Outstanding at August 3, 2007














0.6


56.54Exercisable at August 3, 2007














0.6


56.54Weighted maturity








3.6 years


With
regard to the figures shown in the above table, it has to be considered that benefits from the stock option plans only arise if the Daimler share price exceeds the hurdle which has
been individually defined for each stock option plan and if the owner of the stock options realizes an exercise. As variable compensation, only the difference between the reference and exercise price
of the respective stock option plan is paid out. The following average exercise price is only a statistical factor, which results from the weighted average of the exercise prices shown in the table
for the basic terms of the SOP. The sum of rights shown here is calculated from the addition of the different amounts of options that were granted in the years 2000 to 2004.

F-56

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

21. Pensions and similar obligations

Provisions for pension benefit plans and similar obligations are comprised of the following components:

At December 31,in millions of €

2009

2008Provision for pension benefits (pension plans)


3,148


3,282Provision for other post-employment benefits


924


848Provision for other benefits


10


104,082


4,140


Defined pension benefit plans

The Group provides pension benefits with defined entitlements to almost all of its employees, which have to be accounted for as defined
benefit plans and are funded in large part with assets. Starting in 2008, the majority of the active employees are entitled to pay-related defined pension benefits. Under these plans,
employees earn benefits for each year of service. The benefits earned per year of service are dependent on the salary level and age of the respective employees.

Funded status.The following information with respect to the Group's pension plans is presented separately for German plans and
non-German plans. In 2006 and 2005, the non-German plans were principally comprised of plans in the United States still including the Chrysler plans. In 2007, as a result of
the deconsolidation of Chrysler, the Group's provisions for pension benefits and the corresponding plan assets decreased significantly.

F-57

---





DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

The funded status has developed since 2005 as follows:

At December 31, 2009

At December 31, 2008

At December 31, 2007in millions of €

Total

German
plans

Non-German
plans

Total

German
plans

Non-German
plans

Total

German
plans

Non-German
plansPresent value of defined benefit obligations


16,529


14,183


2,346


15,044


12,780


2,264


15,686


13,539


2,147Less fair value of plan assets


10,624


9,197


1,427


10,110


8,796


1,314


13,774


12,073


1,701Funded status deficit (surplus)


5,905


4,986


919


4,934


3,984


950


1,912


1,466


446




At December 31, 2006

At December 31, 2005in millions of €

Total

German
plans

Non-German
plans

Total

German
plans

Non-German
plansPresent value of defined benefit obligations


37,466


14,728


22,738


41,514


15,163


26,351Less fair value of plan assets


35,176


11,542


23,634


34,348


10,590


23,758Funded status deficit (surplus)


2,290


3,186


(896
)

7,166


4,573


2,593


The
reconciliation of the funded status to the net amounts recognized in the consolidated statement of financial position is as follows:

At December 31, 2009

At December 31, 2008in millions of €

Total

German
plans

Non-German
plans

Total

German
plans

Non-German
plansFunded status


5,905


4,986


919


4,934


3,984


950Unrecognized actuarial net losses


(2,795
)

(2,465
)

(330
)

(1,677
)

(1,347
)

(330
)Unrecognized past service cost


(1
)




(1
)

(1
)




(1
)Net amounts recognized


3,109


2,521


588


3,256


2,637


619Thereof recognized in: Other assets


(39
)




(39
)

(26
)




(26
)Thereof recognized in: Provisions for pensions and similar obligations


3,148


2,521


627


3,282


2,637


645


F-58

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

The
development of the present value of the defined pension benefit obligations and the fair value of plan assets is as follows:

2009

2008in millions of €

Total

German
plans

Non-German
plans

Total

German
plans

Non-German
plansPresent value of the defined benefit obligation at January 1


15,044


12,780


2,264


15,686


13,539


2,147Current service cost


295


226


69


348


272


76Interest cost


847


734


113


824


715


109Contributions by plan participants


57


54


3


142


140


2Actuarial (gains) losses


1,134


1,015


119


(1,143
)

(1,150
)

7Past service cost (income)


4





4


(109
)

(121
)

12Curtailments











(9
)




(9
)Settlements


(101
)




(101
)

(89
)

(1
)

(88
)Pension benefits paid


(733
)

(626
)

(107
)

(682
)

(614
)

(68
)Currency exchange-rate and other changes


(18
)




(18
)

76





76Present value of the defined benefit obligation at December 31


16,529


14,183


2,346


15,044


12,780


2,264Thereof with plan assets


15,300


13,058


2,242


13,911


11,747


2,164Thereof without plan assets


1,229


1,125


104


1,133


1,033


100Fair value of plan assets at January 1


10,110


8,796


1,314


13,774


12,073


1,701Expected return on plan assets


660


568


92


901


782


119Actuarial gains (losses)


(32
)

(116
)

84


(3,970
)

(3,520
)

(450
)Actual return on plan assets


628


452


176


(3,069
)

(2,738
)

(331
)Contributions by the employer


602


500


102


58





58Contributions by plan participants


3





3


2





2Settlements


(89
)




(89
)

(67
)




(67
)Benefits paid


(645
)

(551
)

(94
)

(606
)

(539
)

(67
)Currency exchange-rate and other changes


15





15


18





18Fair value of plan assets at December 31


10,624


9,197


1,427


10,110


8,796


1,314


The
experience related adjustments, which are the differences between the earlier actuarial assumptions applied and actual developments, are as shown in the following table (based on the
pension benefit plans and plan assets at December 31):

At December 31,in millions of €

2009

2008

2007

2006

2005Present value of obligation


(43
)

(194
)

154


45


(201
)Fair value of plan assets


(32
)

(3,970
)

(238
)

1,685


1,629


F-59

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Plan assets.At December 31, 2009, plan assets were invested in diversified portfolios that consisted primarily of debt and equity
securities.
Plan assets and income from plan assets are used solely to pay pension benefits and to administer the plans. The Group's plan asset allocations are presented in the following table:

Plan assets
German plans
At December 31,

Plan assets
Non-German plans At December 31,in % of plan assets

2009

2008

2009

2008Equity securities


26


40


45


41Debt securities


49


47


40


43Alternative investments


8


9


4


5Real estate


4


4


3


5Liquidity and other plan assets


13


.


8


6


Alternative
investments consist of private equity and debt investments as well as investments in commodities and hedge funds.

Assumptions.The measurement date for the Group's pension benefit obligations and plan assets is generally December 31. The
measurement date
for the Group's net periodic pension cost is generally January 1. The assumptions used to calculate 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
Group used the following weighted average assumptions to determine pension benefit obligations:

German plans
At December 31,

Non-German plans
At December 31,in %

2009

2008

2009

2008Discount rates


5.3


5.9


5.1


5.0Expected long-term remuneration increases1








3.9


3.7Expected increase in cost of living2


1.8


1.8








1For
most German plans, expected increases in long-term remuneration are not a part of the benefit formula.2For
most non-German plans, expected increases in cost of living are not a part of the benefit formula.


The Group used the following weighted average assumptions to determine net periodic pension cost:

German Plans

Non-German Plansin %

2009

2008

2007

2009

2008

2007Discount rates


5.9


5.4


4.5


5.0


5.3


5.7Expected long-term returns on plan assets


6.5


6.5


7.5


7.2


7.3


8.5Expected long-term remuneration increases1





3.1


2.5


3.7


4.6


4.1Expected increase in cost of living2


1.8


1.9


1.9











1For
most German plans, expected increases in long-term remuneration are not a part of the benefit formula.2For
most non-German plans, expected increases in cost of living are not a part of the benefit formula.


F-60

---





DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Discount rates.The discount rates for German and non-German pension plans are determined annually as of December 31 on the
basis
of high-quality corporate bonds with maturities and values matching those of the pension payments.

Expected return on plan assets.The expected long-term rates of return for German and non-German plan assets are primarily
derived from the asset allocations of plan assets and expected future returns for the various asset classes in the portfolios. Temporary variability in the asset allocations of plan assets does not
result in adjustments of the expected long-term rates of return. Our investment committees survey banks and large asset portfolio managers about their expectations for future returns for
the relevant market indices. The allocation-weighted average return expectations serve as an initial indicator for the expected rate of return on plan assets for each pension fund.

In
addition, Daimler considers long-term actual plan assets' results and historical market returns in its evaluation in order to reflect the long-term character
of the plan assets.

Multi-employer plans.Daimler participates in some collectively bargained defined benefit pension plans maintained by more than
one employer. The
Group accounts for these plans as defined contribution plans because the information required to use defined benefit accounting is not available in a timely manner and in sufficient detail. The Group
can not exercise direct control over such plans and the plan-trustees have no legal obligation to share information directly with participating employers. Based on available information,
Daimler's share in the underfunded status of the plans (difference between liabilities and assets), as of the beginning of 2009 amounted to €0.1 billion. Higher contributions by
the Group to such a pension plan could result in particular when the underfunded status exceeds a specific level.

Net pension cost (income).The components of net pension cost (income) for the continued and discontinued operations were as
follows:

2009

2008

2007in millions of €

Total

German
plans

Non-German
plans

Total

German
plans

Non-German
plans

Total

German
plans

Non-German plansCurrent service cost


295


226


69


348


272


76


609


334


275Interest cost


847


734


113


824


715


109


1,421


651


770Expected return on plan assets


(660
)

(568
)

(92
)

(901
)

(782
)

(119
)

(2,016
)

(862
)

(1,154
)Amortization of net actuarial (gains) losses


27


14


13


(1
)




(1
)

(38
)




(38
)Past service cost (income)


5





5


(120
)

(121
)

1


46





46Net periodic pension cost (income)


514


406


108


150


84


66


22


123


(101
)Curtailments and settlements


17





17


3





3


21


(2
)

23Net pension cost (income)


531


406


125


153


84


69


43


121


(78
)


F-61

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Net pension cost is included in the following line items within the consolidated statements of income (loss):

in millions of €

2009

2008

2007Cost of sales


172


129


216Selling expenses


70


65


53General administrative expenses


37


12


37Research and non-capitalized development costs


38


25


33Interest income (expense), net


214


(78
)

(224
)Net profit (loss) from discontinued operations








(72
)531


153


43


Expected payments.In 2010, Daimler expects to make cash contributions of €0.3 billion to its pension plans. In
addition, the
Group expects to make pension benefit payments of €0.1 billion under pension benefit schemes without plan assets.

Defined pension contribution plans

At Daimler, the payments made under defined pension contribution plans are primarily related to government-run pension
plans. In 2009, the total cost from payments made under defined contribution plans amounted to €1.0 billion (2008: €1.0 billion; 2007:
€1.2 billion).

Other post-employment benefits

Certain foreign subsidiaries of Daimler provide their employees with post-employment health and life-insurance
benefits with defined entitlements, which have to be accounted for as defined benefit plans. As a result of the deconsolidation of the Chrysler activities in 2007, the Group's benefit obligations and
net benefit costs under other post-employment benefit plans are no longer material to the Group's continuing operations.

22. Provisions for other risks

The development of provisions for other risks is summarized as follows:

in millions of €

Product
warranties

Sales
incentives

Personnel
and social
costs

Other

TotalBalance at December 31, 2008


5,926


887


2,350


2,577


11,740Thereof current


3,025


887


1,031


1,887


6,830Thereof non-current


2,901


.


1,319


690


4,910Additions


1,949


795


581


993


4,318Utilizations


(2,755
)

(711
)

(900
)

(758
)

(5,124
)Reversals


(321
)

(59
)

(174
)

(358
)

(912
)Addition of accrued interest and effects of changes in discount rates


658





210


135


1,003Currency translation and other changes


32


2


(13
)

(39
)

(18
)Balance at December 31, 2009


5,489


914


2,054


2,550


11,007Thereof current


2,874


914


803


1,720


6,311Thereof non-current


2,615





1,251


830


4,696


F-62

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Product warranties.Daimler issues various types of product warranties, under which it generally guarantees the performance of
products delivered and
services rendered for a certain period or term. The provision for these product warranties covers expected costs for legal and contractual warranty claims, as well as expected costs for policy
coverage, recall campaigns and buyback commitments. The provision for buyback commitments represents the expected costs related to the Group's obligation, under certain conditions, to repurchase a
vehicle from a customer. Buy-backs may occur for a number of reasons including litigation, compliance with laws and regulations in a particular region and customer satisfaction issues. The utilization
date of product warranties depends on the incidence of the warranty claims and can span the entire term of the product warranties.

Sales incentives.The provisions for sales incentives relate to obligations for expected reductions in revenue already
recognized. These include
bonuses, discounts and other price reduction commitments, which are entered into with contractual partners in the reporting period or in previous periods but will not be paid until subsequent periods.

Personnel and social costs.Provisions for personnel and social costs primarily comprise expected expenses of the Group for
employee anniversary
bonuses, profit sharing arrangements, management bonuses as well as early retirement and partial retirement plans. The additions recorded to the provisions for profit sharing and management bonuses in
the reporting year usually result in cash outflows in the following year.

Other.Provisions for other risks comprise, among others, expected costs in connection with liability and litigation risks,
obligations under the EU
End-of-Life Vehicles Directive and environmental protection risks. They also include provisions for other taxes and various other risks.

23. Financing liabilities

At December 31, 2009

At December 31, 2008in millions of €

Current

Non-current

Total

Current

Non-current

TotalNotes/bonds


7,972


22,123


30,095


11,158


22,935


34,093Commercial paper


176





176


2,320





2,320Liabilities to financial institutions


6,066


6,934


13,000


8,038


6,570


14,608Deposits from the direct banking business


9,403


3,195


12,598


5,033


977


6,010Liabilities from ABS transactions


753


539


1,292


370


327


697Liabilities from finance lease


49


348


397


60


391


451Loans, other financing liabilities


617


119


736


449


9


45825,036


33,258


58,294


27,428


31,209


58,637


Based
on market conditions and liquidity needs, Daimler may sell certain receivables and future lease payments resulting from equipment on operating leases to third parties. As of
December 31, 2009, relating to these transactions, liabilities of €1,330 million (2008: €764 million) are accounted for as secured borrowings. The
respective liabilities are reported under liabilities from ABS transactions in the amount of €1,292 million (2008: €697 million) and under liabilities to
financial institutions in the amount of €38 million (2008: €66 million). In 2008, €1 million was reported under loans, other
financing liabilities.

Liabilities
from finance leases relate primarily to leases of property, plant and equipment which transfer substantially all risks and rewards to the Group as lessee. Future minimum
lease payments under finance leases

F-63

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

at
December 31, 2009 amounted to €588 million (2008: €637 million). The reconciliation of future minimum lease payments from finance lease
arrangements to the corresponding liabilities is as follows:

Future minimum lease payments
At December 31,

Interest included in future minimum lease payments
At December 31,

Liabilities from finance lease arrangements
At December 31,in millions of €

2009

2008

2009

2008

2009

2008Maturitywithin one year


61


77


12


17


49


60between one and five years


160


204


62


62


98


142later than five years


367


356


117


107


250


249588


637


191


186


397


451


Daimler
AG provides a full and unconditional guarantee of medium-term notes issued by its wholly-owned finance subsidiary Daimler Finance North America LLC, which has
no assets or operations other than those related to the issuance, administration and repayment of such notes.

24. Other financial liabilities

Other financial liabilities are composed of the following items:

At December 31, 2009

At December 31, 2008in millions of €

Current

Non-current

Total

Current

Non-current

TotalDerivative financial instruments used in hedge accounting


141


67


208


185


46


231Financial liabilities recognized at fair value through profit or loss


273


402


675


572


554


1,126Liabilities from residual value guarantees


1,338


1,115


2,453


1,550


1,090


2,640Liabilities from wages and salaries


896





896


894





894Other


4,941


564


5,505


5,175


252


5,427Miscellaneous other financial liabilities


7,175


1,679


8,854


7,619


1,342


8,9617,589


2,148


9,737


8,376


1,942


10,318


Derivative financial instruments.Information on derivative financial instruments can be found in Note 29.

Financial
liabilities recognized at fair value through profit or loss relate exclusively to derivative financial instruments, which are not used in hedge accounting.

F-64

---





DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

25. Other liabilities

Other liabilities are composed of the following items:

At December 31, 2009

At December 31, 2008in millions of €

Current

Non-current

Total

Current

Non-current

TotalIncome tax liabilities


56


74


130


135


76


211Miscellaneous other liabilities


1,018


1


1,019


922


1


9231,074


75


1,149


1,057


77


1,134


26. Consolidated statement of cash flows

Calculating funds.As of December 31, 2009, cash and cash equivalents include restricted funds of €14 million
(2008:
€139 million; 2007: €223 million). The restricted funds of prior periods resulted from consolidated special purpose entities and could solely be used to
settle the respective financial liabilities.

Cash provided by operating activities.The changes in other operating assets and liabilities are as follows:

in millions of €

2009

2008

2007Provisions


203


(1,382
)

(859
)Financial instruments


(44
)

217


(159
)Miscellaneous other assets and liabilities


740


528


1,718899


(637
)

700


Cash
provided by operating activities includes the following cash flows:

in millions of €

2009

2008

2007Interest paid


(894
)

(651
)

(1,541
)Interest received


471


765


977Income taxes paid, net


(358
)

(898
)

(1,020
)Dividends received


109


67


69


The
line item other non-cash expense and income within the reconciliation of net profit to cash provided by operating activities primarily comprises adjustments for deferred
tax expense (benefit) and the Group's share in the profit (loss) of companies accounted for using the equity method. In addition, the amount in 2008 includes the impairment of certain Chrysler related
assets.

Cash used for financing activities.Cash used for financing activities includes cash flows from hedging the currency risks of
financial liabilities.
In 2009, cash used for financing activities included payments for the reduction of the outstanding finance lease liabilities of €71 million (2008:
€79 million; 2007: €77 million).

27. Legal proceedings

Various legal proceedings, claims and governmental investigations are pending against Daimler AG and its subsidiaries on a wide range
of topics, including vehicle safety, emissions, fuel economy, financial services, dealer, supplier and other contractual relationships, intellectual property rights, product warranties, environmental
matters, and shareholder matters. Some of these proceedings allege defects in various components in several different vehicle models or allege design defects relating to vehicle stability, pedal
misapplication,

F-65

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

brakes
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 of these proceedings could require us to pay substantial compensatory and punitive
damages or undertake service actions, recall campaigns or other costly actions.

On
August 17, 2009, the Official Committee of Unsecured Creditors of OldCarCo LLC (formerly Chrysler LLC) filed a lawsuit with the United States Bankruptcy Court,
Southern District of New York, against Daimler AG, Daimler North America Corporation and certain (former) board members of Chrysler LLC. The Committee claims unspecified damages based on
theories of constructive and intentional fraudulent transfer, breach of fiduciary duty, and other legal theories, alleging that the consideration received in certain transactions effected in
connection with the investment by Cerberus in Chrysler LLC was not fair consideration. Daimler considers these claims and allegations to be without merit and will defend itself vigorously.

The
Federal Republic of Germany initiated arbitration proceedings against Daimler Financial Services AG, Deutsche Telekom AG and Toll Collect GbR and submitted its statement of claims in
August 2005. It seeks damages, contractual penalties and the transfer of intellectual property rights to Toll Collect GmbH. In particular, the Federal Republic of Germany is claiming



Since,
among other things, some of the contractual penalties 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.

Defendants
submitted their response to the statement of claims on June 30, 2006. The Federal Republic of Germany delivered its reply to the arbitrators on February 15,
2007, and the defendants delivered their rebuttal on October 1, 2007 (see also Note 28). The arbitrators held the first hearing on June 16 and 17, 2008. Additional briefs from the
claimant and the defendants were filed in May 2009. Following a motion by defendants to disqualify the arbitrator nominated by plaintiff, the arbitration panel cancelled a hearing scheduled for
October 2009. We do not expect the hearing to be rescheduled before the motion to disqualify has been finally resolved. Daimler believes the claims are without merit and will continue to defend itself
vigorously.

As
previously reported, the US Securities and Exchange Commission ("SEC") and the US Department of Justice ("DOJ") are conducting an investigation into possible violations of law by
Daimler including the anti-bribery, record-keeping and internal control provisions of the US Foreign Corrupt Practices Act ("FCPA"). Daimler has voluntarily shared 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 has provided the agencies with
information pursuant to outstanding subpoenas and other requests. Daimler has also had communications with and provided documents to the offices of German public prosecutors regarding the matters that
have been under investigation by the DOJ and SEC.

Daimler
has completed its internal investigation and has determined that in a number of jurisdictions, primarily in Africa, Asia and Eastern Europe, improper payments were made which
raise concerns under the FCPA, under German law, and under the laws of other jurisdictions. Daimler has taken various actions designed to address and resolve the issues identified in the course of its
investigation and to safeguard against the recurrence

F-66

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

of
improper conduct. These include establishing a company-wide compliance organization, evaluating and revising Daimler's governance policies and internal control procedures and taking
personnel actions.

Daimler
has been in discussions with the DOJ and SEC regarding consensually resolving the agencies' investigations. There can be no assurance about whether and when settlements with the
DOJ or SEC will become final and effective.

Litigation
is subject to many uncertainties and Daimler cannot predict the outcome of individual matters with assurance. The Group establishes provisions in connection with pending or
threatened litigation if a loss is probable and can be reasonably estimated. Since these provisions, which are reflected in the Group's consolidated financial statements, represent estimates, it is
reasonably possible that the resolution of some of these matters could require us to make payments in excess of the amounts accrued in an amount or range of amounts that could not be reasonably
estimated at December 31, 2009. It is also reasonably possible that the resolution of some of the matters for which provisions could not be made may require the Group to make payments in an
amount or range of amounts that could not be reasonably estimated at December 31, 2009. Although the final resolution of any such matters could have a material effect on Daimler's operating
results and cash flows for a particular reporting period, Daimler believes that it should not materially affect the Group's financial position.

28. Guarantees and other financial commitments

Guarantees.The following table shows the amounts of provisions and liabilities at December 31 which have been established
by the Group in
connection with its issued guarantees (excluding product warranties):

Amount recognized
as a liability
At December 31,in millions of €

2009

2008Financial guarantees


183


262Guarantees under buy-back commitments


66


62Other guarantees


105


132354


456


Financial guarantees.Financial guarantees principally represent guarantees that require the Group to make certain payments if
guarantee holders fail
to meet their financial obligations. The maximum potential obligation resulting from these guarantees amounted to €1,493 million at December 31, 2009 (December 31,
2008: €1,857 million). These amounts include guarantees, which the Group issued for the benefit of Chrysler in connection with the Chrysler transactions entered into in 2007 and
2009. These guarantees relate to Chrysler's pension obligations and certain other financial obligations of Chrysler. For a portion of these financial guarantees, Chrysler provided collateral to an
escrow account. See Note 2 for the amounts and further information.

Guarantees under buy-back commitments.Guarantees under buy-back commitments represent arrangements whereby the Group guarantees
specified trade-in or resale values for sold vehicles. Such guarantees provide the holder with the right to return purchased vehicles to the Group, the right being primarily contingent on
the future purchase of vehicles or services. As of December 31, 2009, the maximum potential obligation resulting from these buy-back guarantees was €690 million (2008:
€715 million). 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 are not included in those amounts.

Other guarantees.Other guarantees principally comprise pledges or indemnifications related to the quality or timing of
performance by third parties
or participations in performance guarantees of consortiums. As

F-67

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

of
December 31, 2009, the best estimate for obligations under other guarantees for which no provisions had yet been recorded was €95 million (2008:
€61 million).

In
2002, our subsidiary Daimler Financial Services AG, Deutsche Telekom AG and Compagnie Financière et Industrielle des Autoroutes S.A. (Cofiroute) entered into a
consortium agreement in order to jointly develop, install, and operate under a contract with the Federal Republic of Germany (operating agreement) a system for the electronic collection of tolls for
all commercial vehicles over 12 tons GVW using German highways. Daimler 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).

According
to the operating agreement, the toll collection system had to be operational no later than August 31, 2003. After a delay of 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 the final operating permit, and continues to
operate the toll collection system under the preliminary operating permit in the interim.

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 €150 million per year until the final operating permit has been issued and at €100 million per
year following the issuance of the final operating permit. These cap amounts are subject to a 3% increase for every year of operation.

Beginning
in June 2006, the Federal Republic of Germany began reducing monthly payments to Toll Collect GmbH by €8 million in partial set-off
against amounts claimed in the arbitration proceeding referred to below. This offsetting may require the consortium members to provide additional operating funds to Toll Collect GmbH.

The
operating agreement calls for the submission of all disputes related to the toll collection system to arbitration. The Federal Republic of Germany has initiated arbitration
proceedings against Daimler 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 revenue that allegedly arose from delays in the operability of the toll collection system. See Note 27 for additional
information.

Each
of the consortium members (including Daimler Financial Services AG) has 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, Daimler AG has guaranteed bank loans obtained by Toll
Collect GmbH. The guarantees are described in detail below:



F-68

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)



Cofiroute's
risks and obligations are limited to €70 million. Daimler Financial Services AG and Deutsche Telekom AG are jointly obliged to indemnify Cofiroute for
amounts exceeding this limitation.

While
Daimler's maximum future obligation resulting from the guarantee of the bank loan can be determined (2009: €115 million), the Group is unable to reasonably
estimate the amount or range of amounts of possible loss resulting from the financial guarantee in form of the equity maintenance undertaking due to the various uncertainties described above, although
it could be material. Only the guarantee for the bank loan is included in the above disclosures for financial guarantees.

Obligations
associated with product warranties are also not included in the above disclosures. See Note 22 for provisions relating to such obligations.

Other financial commitments.In connection with certain production programs, Daimler has committed to purchase various volumes
of outsourced
manufactured parts and components over extended periods. The Group also has entered into service arrangements for the provision of future services. In addition, the Group has committed to purchase or
invest in the construction and maintenance of various production facilities. Amounts under the latter arrangements represent commitments to purchase plant or equipment in the future. As of
December 31, 2009, commitments to purchase outsourced manufactured parts and components, to purchase services, and to invest in plant and equipment are approximately
€4.5 billion.

The
Group has also entered into non-cancelable operating leases for property, plant and equipment. In 2009, Daimler recognized as expense rental payments of
€513 million (2008:
€563 million; 2007: €817 million). Future minimum lease payments under non-cancelable long-term lease agreements are due as
follows (nominal amounts):

At December 31,in millions of €

2009

2008Maturitywithin one year


304


306between one and five years


951


997later than five years


1,117


1,2392,372


2,542


In
addition, the Group issued loan commitments for a total of €1.6 billion and €1.5 billion as of December 31, 2009 and 2008,
respectively. These loan commitments are unused as of those dates.

F-69

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

29. Financial instruments

Carrying amounts and fair values of financial instruments

The following table shows the carrying amounts and fair values of the Group's financial instruments. The fair value of a financial
instrument is the price at which a party would accept the rights and/or obligations of that financial instrument from another independent party. Given the varying influencing factors, the reported
fair values can only be viewed as indicators of the prices that may actually be achieved on the market.

At December 31, 2009

At December 31, 2008in millions of €

Carrying amount

Fair value

Carrying amount

Fair valueFinancial assetsReceivables from financial services


38,478


38,510


42,387


41,927Trade receivables


5,285


5,285


6,999


6,999Cash and cash equivalents


9,800


9,800


6,912


6,912Other financial assetsAvailable-for-sale financial assets1


7,426


7,426


1,558


1,558Financial assets recognized at fair value through profit or loss


1,218


1,218


2,365


2,365Derivative financial instruments used in hedge accounting


1,074


1,074


1,984


1,984Other receivables and assets


1,759


1,759


2,089


2,08965,040


65,072


64,294


63,834Financial liabilitiesFinancing liabilities


58,294


59,677


58,637


55,755Trade payables


5,622


5,622


6,478


6,478Other financial liabilitiesFinancial liabilities recognized at fair value through profit or loss


675


675


1,126


1,126Derivative financial instruments used in hedge accounting


208


208


231


231Miscellaneous other financial liabilities


8,854


8,854


8,961


8,96173,653


75,036


75,433


72,551


1Includes
equity interests measured at cost of €699 million (2008: €551 million), whose fair value can not be determined with sufficient
reliability.


F-70

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)






At December 31,in millions of €

2009

2008AssetsTrade receivables


5,285


6,999Other receivables and assets


1,759


2,089Receivables from financial services1


26,787


27,085Loans and receivables


33,831


36,173Available-for-sale financial assets


7,426


1,558Financial assets recognized at fair value through profit or loss2


1,218


2,365LiabilitiesTrade payables


5,622


6,478Financing liabilities3


56,567


57,422Other financial liabilities4


8,671


8,699Financial liabilities measured at cost


70,860


72,599Financial liabilities recognized at fair value through profit or loss2


675


1,126


The table above does not include cash and cash equivalents or the carrying amounts of derivative financial instruments
used in hedge accounting as these financial instruments are not assigned to an IAS 39 measurement category. 1This
does not include lease receivables of €11,691 million (2008: €15,302 million) as these are not assigned to an IAS 39
measurement category.2Financial
instruments classified as held for trading purposes. These figures include also financial instruments that do not qualify for hedge accounting treatment.3This
does not include liabilities from finance leases of €397 million (2008: €451 million) or liabilities from non-transference
of assets of €1,330 million (2008: €764 million) as these are not assigned to an IAS 39 measurement category.4This
does not include liabilities from financial guarantees of €183 million (2008: €262 million) as these are not assigned to an
IAS 39 measurement category.


F-71

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DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Financial assets and liabilities measured at fair value are classified into the following fair value hierarchy:

At December 31, 2009in millions of €

Total

Level11

Level22

Level33Assets measured at fair valueFinancial assets available for sale


6,727


940


5,787


Financial assets recognized at fair value through profit or loss


1,218





1,218


Derivative financial instruments used in hedge accounting


1,074





1,074


9,019


940


8,079


Liabilities measured at fair valueFinancial liabilities recognized at fair value through profit or loss


675





675


Derivative financial instruments used in hedge accounting


208





208


883





883





1Fair
value measurement based on quoted prices (unadjusted) in active markets for identical assets or liabilities.2Fair
value measurement based on inputs for the asset or liability that are observable on active markets either directly (i.e. as prices) or indirectly (i.e. derived from
prices).3Fair
value measurement based on inputs for the asset or liability that are not observable market data.


The fair values of financial instruments were calculated on the basis of market information available on the balance sheet date. The following
methods and premises were used:

Receivables from financial services.The fair values of receivables from financial services with variable interest rates are
estimated to be equal to
the respective carrying amounts since the interest rates agreed and those available on the market do not significantly differ. The fair values of receivables from financial services with fixed
interest rates are determined on the basis of discounted expected future cash flows. The discounting is based on the current interest rates at which similar loans with identical terms could have been
borrowed as of December 31, 2009 and December 31, 2008.

Trade receivables and cash and cash equivalents.Due to the short terms of these financial instruments, it is assumed that their
fair values are
equal to the carrying amounts.

Other financial assets.Financial assets available for sale include:



F-72

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DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Financial
assets recognized at fair value through profit or loss include:



Derivative
financial instruments used in hedge accounting include:



Other
receivables and assets include:



Financing liabilities.The fair values of bonds are calculated as the present values of the estimated future cash flows. Market
interest rates for
the appropriate terms are used for discounting. On account of the short terms of commercial papers and loans used in revolving credit facilities, it is assumed that the carrying amounts of these
financial instruments approximate their fair values.

Trade payables.Due to the short maturities of these financial instruments, it is assumed that their fair values are equal to
the carrying amounts.

Other financial liabilities.Financial liabilities recognized at fair value through profit or loss include:



F-73

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DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Miscellaneous
other financial liabilities include:



Net gains or losses

The following table shows the net gains or losses of financial instruments included in the consolidated statement of income (loss) (not
including derivative financial instruments used in hedge accounting):

in millions of €

2009

2008

2007Financial assets and liabilities recognized at fair value through profit or loss1


(407
)

(62
)

64Financial assets available for sale


38


(29
)

168Loans and receivables


(546
)

(2,022
)

(375
)Financial liabilities measured at cost


(130
)

1


13


---

Net gains and losses of financial assets and liabilities recognized at fair value through profit or loss include primarily gains and losses
attributable to changes in fair value.

Net
gains and losses on financial assets available for sale include realized income from these investments and gains or losses from sales transactions.

Net
gains and losses on loans and receivables are mainly comprised of impairment losses and recoveries that are charged to cost of sales, selling expenses, other financial income
(expense) and net profit (loss) from discontinued operations.

Total interest income and total interest expense

Total interest income and total interest expense of the continued operations for financial assets or financial liabilities that are not
measured at fair value through profit or loss are structured as follows:

in millions of €

2009

2008

2007Total interest income


2,983


3,610


3,429Total interest expense


(2,943
)

(2,990
)

(2,633
)


Please
refer to Note 1 for qualitative descriptions of accounting for financial instruments (including derivative financial instruments).

Information on derivative financial instruments

Use of derivatives.The Group uses derivative financial instruments such as interest rate swaps for hedging interest risks.
Currency risks are hedged
mainly through currency forward transactions and options.

F-74

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Fair values of hedging instruments.The table below shows the fair values of hedging instruments:

At December 31,in millions of €

2009

2008Fair value hedges


425


493Cash flow hedges


441


1,260


Fair value hedges.The Group uses fair value hedges primarily for hedging interest rate risks.

The
changes in fair value of these hedging instruments resulted in net losses of €31 million in 2009 (2008: net gains of €540 million; 2007:
net gains of €144 million). The offsetting changes in the value of underlying transactions resulted in net gains of €53 million in 2009 (2008: net losses
of €567 million; 2007: net losses of €150 million).

These
figures also include the portions of derivative financial instruments excluded from the hedge effectiveness test and the ineffective portions.

Cash flow hedges.The Group uses cash flow hedges primarily for hedging currency and interest rate risks.

Unrealized
pre-tax gains and losses on the measurement of derivatives, which are recognized in equity without an effect on earnings, are as follows:

in billions of €

2009

2008

2007Unrealized gains (losses)


.


0.5


1.2


Reclassifications
of pre-tax gains (losses) from equity to the statement of income (loss) are as follows:

in millions of €

2009

2008

2007Revenue


707


1,090


487Cost of sales


(63
)

(21
)

14Interest income (expense), net


(230
)

(527
)

30Net profit (loss) from discontinued operations








2414


542


533


The
unrealized gains and losses on the measurement as well as reclassifications from equity to income do not include gains and losses from derivatives of investments which are accounted
for using the equity method (see Note 19 for further information).

The
consolidated net loss for 2009 includes net losses (before income taxes) of €1 million (2008: net gains of €2 million; 2007: net gains
of €6 million) from the valuation of derivative financial instruments which were ineffective for hedging purposes.

In
2009, the discontinuation of cash flow hedges resulted in gains of €18 million (2008: €3 million; 2007:
€5 million).

The
maturities of the interest rate hedges and cross currency interest rate hedges correspond with those of the underlying transactions. As of December 31, 2009, Daimler utilized
derivative instruments with a maximum maturity of 36 months as hedges for currency risks arising from future transactions.

F-75

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

30.   Risk management

General information on financial risk

Daimler is exposed to market risks from changes in foreign currency exchange rates, interest rates and equity prices, while commodity
price risks arise from procurement. In addition, the Group is exposed to credit risks mainly from its lease and financing activities and from trade receivables. Furthermore, the Group is exposed to
liquidity risks relating to its credit and market risks or a deterioration of its operating business or financial market disturbances. With respect to the Daimler Financial Services
segment, the Group is exposed to credit risks arising from operating lease contracts, finance lease contracts and financing contracts. If these financial risks materialize, they could adversely affect
Daimler's financial position, cash flows and profitability.

Daimler
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 the respective controlling. The guidelines upon which the Group's risk management processes are based are designed to identify and analyze these risks throughout
the Group, to set appropriate risk limits and controls and to monitor the risks by means of reliable and up-to-date administrative and information systems. The guidelines and
systems are regularly reviewed and adjusted to changes in markets and products.

The
Group manages and monitors these risks primarily through its operating and financing activities and, if required, through the use of derivative financial instruments. Daimler does
not use derivative financial instruments for purposes other than risk management. Without these derivative financial instruments, the Group would be exposed to higher financial risks (additional
information on financial instruments and especially derivatives is included in Note 29). Daimler regularly evaluates its financial risks with due consideration of changes in key economic
indicators and up-to-date market information.

Any
market sensitive instruments, including equity and debt securities, that the funds hold to finance pension and other post-employment benefit obligations are not included
in this quantitative and qualitative analysis. Please refer to Note 21 for additional information regarding Daimler's pension plans and funds.

Credit risk

Credit risk is the risk of economic loss arising from a counterparty's failure to repay or service debt according to the contractual
terms. Credit risk encompasses both the direct risk of default and the risk of a deterioration of creditworthiness as well as concentration risks.

The
maximum risk positions of financial assets which generally are subject to credit risk, are equal to their carrying amounts and are shown in the following table:

in millions of €

See also
Note

Maximum risk
position
2009

Maximum risk
position
2008Liquid assets





16,142


8,003Receivables from financial services


13


38,478


42,387Trade receivables


17


5,285


6,999Derivative financial instruments used in hedge accounting (assets only)


14


1,074


1,984Derivative financial instruments not used in hedge accounting (assets only)


14


1,218


2,088Loan commitments


28


1,587


1,536Other receivables and financial assets


14


1,759


2,089


F-76

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Liquid assets.Liquid assets mainly consist of cash and cash equivalents and debt instruments from available-for-sale
financial assets. With the investment of liquid assets, the banks and issuers of securities are selected very carefully and diversified in accordance with a limit system. The limits and their
utilizations are reassessed continuously. Hence, there were various limit adjustments relating to the current financial market crisis. In line with the Group's risk policy, the predominant part of
liquid assets is held in investments with an external rating of "A" or better.

Receivables from financial services.Daimler's financing and leasing activities are primarily focused on supporting the sale of
the automotive
products of the Group. As a consequence of these activities, the Group is exposed to credit risk, which is monitored and steered based on defined standards, guidelines and procedures.
Daimler Financial Services manages its credit risk irrespective of whether it is related to an operating lease or a finance lease contract. For this reason, statements concerning the credit risk of
Daimler Financial Services refer to the entire leasing business, unless specified otherwise.

The
exposure to credit risk from financing and lease activities is monitored based on the portfolio subject to credit risk. The portfolio subject to credit risk is an internal control
quantity that consists of receivables from financial services, the portion of the operating lease portfolio that is subject to credit risk and the volumes from dealer inventory financing. Receivables
from financial services comprise claims arising from finance lease contracts and repayment claims from financing loans. The operating lease portfolio is reported under "equipment on operating leases"
in the Group's consolidated financial statements.

In
addition, the Daimler Financial Services segment is exposed to credit risk from irrevocable loan commitments to retailers and end customers. At December 31, 2009, irrevocable
loan commitments of Daimler Financial Services amounted to €1,503 million, of which €651 million had a maturity of less than one year;
€852 million had maturities between 2 and 3 years. In 2008, irrevocable loan commitments of Daimler Financial Services amounted to €1,507 million,
of which €572 million had a maturity of less than one year; €869 million had maturities between 2 and 3 years.

The
Daimler Financial Services segment has guidelines at a global as well as at a local level which set the framework for effective risk management. In particular, these rules deal with
minimum requirements for all risk-relevant credit processes, the evaluation of customer quality requests for collateral as well as the treatment of unsecured loans and
non-performing claims. The limitation of concentration risks is implemented primarily by global limits, which refer to single customer exposures. As of December 31, 2009, exposure
to the top 15 customers did not exceed 4.5% of the total portfolio. Daimler Financial Services manages its business considering both, the risk and the return.

With
respect to its financing and lease activities, the Group takes collateral for customer transactions. The value of collateral generally depends on the amount of the financed assets.
Usually, the financed vehicles serve as collateral, secured by certificate of ownership. Furthermore, Daimler Financial Services mitigates the credit risk from financing and lease activities, for
example through advance payments from customers.

Scoring
systems are applied for the assessment of the default risk of retail and small business customers. Corporate customers are evaluated using internal rating instruments and
external credit bureau data if available.

The
scoring and rating results as well as the availability of security and other risk mitigation instruments, such as pre-payments, guarantees and, to a lower extent,
residual debt insurances, are essential elements for credit decisions.

Significant
financing loans and finance leases to corporate customers are evaluated individually for impairment. An individual loan or finance lease is considered impaired when there is
objective evidence that the Group will be unable to collect all amounts due as specified by the contractual terms. Examples of objective

F-77

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

evidence
that loans or finance lease receivables are impaired include the following factors: significant financial difficulty of the borrower, the probability that the borrower falls bankrupt or
become delinquent or defaults on its installment payments, and restructured or renegotiated contracts to avoid delinquency.

The
vast majority of loans and finance lease receivables related to retail or small business customers are grouped into homogeneous pools and collectively assessed for impairment.
Objective evidence that loans and finance lease receivables are impaired includes, for example, adverse changes in the payment status of borrowers included in the pool and an unfavorable change in the
economic conditions affecting the portfolio with similar risk characteristics.

If
single loans and lease receivables are identified to be individually impaired, procedures are initiated to take possession of the asset financed or leased or, alternatively, to
renegotiate the impaired contract. Restructuring policies and practices are based on the indicators or criteria which, in the judgment of local management, indicate that repayment will probably
continue and that the total proceeds expected to be derived from the renegotiated contract exceed the expected proceeds to be derived from repossession and remarketing. For the carrying amounts of the
receivables relating to renegotiated loans that would otherwise be past due or impaired, please refer to Note 13.

Further
details on receivables from financial services and the balance of the recorded impairments are also provided in Note 13.

Trade receivables.Trade receivables are mostly receivables from worldwide sales activities of vehicles and spare parts. The
credit risk from trade
receivables encompasses the default risk of customers, e.g. dealers and general distribution companies, other corporate and private customers. Daimler manages its credit risk from trade
receivables on the basis of internal guidelines.

A
significant part of the trade receivables from each country's domestic business is secured by various country-specific types of collateral. These types include, for instance,
conditional sales, guarantees and sureties as well as mortgages and cash deposits. In addition, Group companies guard against credit risk via credit assessments.

For
trade receivables from export business, Daimler also evaluates each general distribution company's creditworthiness by means of an internal rating process and its country risk. In
this context, the year-end financial statements and other relevant information of the general distribution companies are used and assessed.

Depending
on the creditworthiness of the general distribution companies, Daimler usually establishes credit limits and limits credit risks by the following types of
collateral:



These
procedures are defined in the export credit guideline, which has Group-wide validity.

Appropriate
provisions are recognized for the risks inherent in trade receivables. For this purpose, all receivables are regularly reviewed and impairments are recognized if there is any
objective indication of non performance or other contractual violations. In general, material individual receivables and receivables whose realizability is jeopardized are assessed individually.
Taking country-specific risks and any collateral into consideration, the other receivables are grouped by similarity of contract and tested for impairment collectively.

F-78

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Further
information on trade receivables and the status of impairments recognized is provided in Note 17.

Derivative financial instruments.The Group does not use derivative financial instruments for purposes other than risk
management. Daimler manages
the credit risk exposure in connection with derivative financial instruments through a limit system, which is based on the review of each counterparty's financial strength. This system limits and
diversifies the credit risk. As a result, Daimler is exposed to credit risk only to a low extent with respect to its derivative financial instruments.

Other receivables and financial assets.Other receivables and financial assets included Chrysler related loans, receivables and
other assets, which
were subject to impairment in 2008 (see also Note 12). With respect to other receivables and financial assets in 2009, Daimler is exposed to credit risk only to a low extent.

Liquidity risk

Liquidity risk comprises the risk that a company cannot meet its financial obligations in full.

Daimler
manages its liquidity by holding adequate volumes of liquid assets and maintaining syndicated credit facilities in addition to the cash inflows generated by its operating
business. These liquid assets comprise in particular cash and cash equivalents as well as debt instruments classified as held for sale. The Group can dispose of these liquid assets at short notice.

In
general, Daimler makes use of a broad spectrum of financial instruments to cover its funding requirements. Depending on funding requirements and market conditions, Daimler issues
commercial paper, bonds and financial instruments secured by receivables in various currencies. Credit lines are also used to cover financing requirements. In addition, significantly increased
customer deposits at Mercedes-Benz Bank in 2009 were used as a further source of refinancing. The funds raised are primarily used to finance the cash needs of the lease and financing
business and the working capital and capital expenditure requirements. According to internal guidelines, the refunding of the lease and financing business is generally carried out with matching
maturities of cash flows.

In
light of the financial and economic crisis and the resulting risks, the Group deliberately increased its liquidity in 2009 to €16.1 billion (December 31,
2008: €8.0 billion). The high level of liquidity will tend to decrease again in 2010, depending on the development of the economic environment.

At
year-end 2009, the Group had short-term and long-term credit lines totaling €21.1 billion, of which
€8.0 billion was not utilized. These credit lines include a syndicated US $4.9 billion credit facility of Daimler AG. This facility will mature in December 2011. In
October 2009 the Group replaced the maturing syndicated €3 billion 364-day facility with a new €3 billion
2-year-credit-facility with a syndicate of international banks. These two syndicated facilities serve as a back-up for commercial paper drawings and provide funds
for general corporate purposes. At the end of 2009, both facilities were unused.

From
an operating point of view, the management of the Group's liquidity exposures is centralized by a daily cash pooling process. This process enables Daimler to manage its liquidity
surplus and liquidity requirements according to the actual needs of the Group and each subsidiary. The Group's short-term and mid-term liquidity management takes into account
the maturities of financial assets and financial liabilities and estimates of cash flows from the operating business.

Information
on the Group's financing liabilities is also provided in Note 23 to the consolidated financial statements.

Despite
the ongoing financial market crisis in 2009, Daimler had adequate access to the capital markets. High borrowing costs at the beginning of 2009 decreased significantly for the
Daimler Group as the year progressed. In the case of a renewed negative trend in the financial markets, Daimler could again be faced with increasing borrowing costs and lower financial flexibility.
Higher borrowing costs would have an impact on the competitiveness and profitability of the Group's financial services business.

F-79

---





DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

The following table provides an insight into how the liquidity situation of the Group is affected by the cash flows from financial liabilities and financial
guarantees as of December 31, 2009.

Liquidity runoff1

in millions of €

Total

2010

2011

2012

2013

2014

32015Financing liabilities2


65,827


27,237


16,285


8,168


4,511


4,940


4,686Derivative financial instruments3


1,286


729


363


130


36


26


2Trade payables4


5,622


5,615


7











Other financial liabilities excluding derivatives


8,854


7,175


614


702


160


74


129Irrevocable loan commitments of the Daimler Financial Services segment and of Daimler AG5


1,587


735


686


166








Financial guarantees6


1,493


1,493














Total


84,669


42,984


17,955


9,166


4,707


5,040


4,817


11       The
 values were calculated as follows:
(a)If
the counterparty can request payment at different dates, the liability is included on the basis of the earliest date on which Daimler can be required to
pay. The customer deposits of Mercedes-Benz Bank are considered in this analysis to mature within the first year.(b)The
cash flows of floating interest financial instruments are estimated on the basis of forward rates.2The
stated cash flows of financing liabilities consist of their undiscounted principal and interest payments.3The
undiscounted sum of the net cash outflows of the derivative financial instruments are shown for the respective year. For single time bands, this may also include negative cash flows
from derivatives with an overall positive fair value.4The
cash outflows of trade payables are undiscounted.5The
maximum available amounts are stated.6The
maximum potential obligations under the issued guarantees is stated. It is assumed that the guarantees are called within the first year.


Finance market risks

The global nature of its businesses exposes Daimler to significant market risks resulting from fluctuations in foreign currency
exchange rates and interest rates. In addition, the Group is exposed to market risks in terms of commodity price risk associated with its business operations, which the Group hedges partially through
derivative financial instruments. The Group is also exposed to equity price risk. If these market risks materialize, they will adversely affect the Group's financial position, cash flows and
profitability.

Daimler
manages market risks to minimize the impact of fluctuations in foreign exchange rates, interest rates and commodity prices on the results of the Group and its segments. The Group
calculates its overall exposure to these market risks to provide the basis for hedging decisions, which include the selection of hedging instruments and the determination of hedging volumes and the
corresponding periods. Decisions regarding the management of market risks resulting from fluctuations in foreign exchange rates, interest rates (asset-/liability management) and commodity prices are
regularly made by the relevant Daimler risk management committees.

As
part of its risk management system, Daimler employs value at risk analyses as recommended by the Bank for International Settlements. In performing these analyses, Daimler quantifies
its market risk exposure to

F-80

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

changes
in foreign currency exchange rates, interest rates and equity prices on a continuous basis by predicting the maximum loss over a target time horizon (holding period) and confidence level.

The
value at risk calculations employed:



Daimler
calculates the value at risk for exchange rate, interest rate and equity price risk according to the variance-covariance approach. The value at risk calculation method for
commodity hedging instruments is based on the Monte Carlo simulation.

When
calculating the value at risk by using the variance-covariance approach, Daimler first computes the current fair value of the Group's financial instruments portfolio. Then the
sensitivity of the portfolio value to changes in the relevant market risk factors, such as particular foreign currency exchange rates or interest rates of specific maturities, is quantified. Based on
expected volatilities and correlations of these market risk factors which are obtained from the RiskMetrics dataset, a statistical distribution of potential changes in the portfolio value
at the end of the holding period is computed. The loss which is reached or exceeded with a probability of only 1% can be deduced from this calculation and represents the value at risk.

The
Monte Carlo simulation uses random numbers to generate possible changes in market risk factors over the holding period. The changes in market risk factors indicate a possible change
in the portfolio value. Running multiple repetitions of this simulation leads to a distribution of portfolio value changes.

The
value at risk can be determined based on this distribution as the portfolio value loss which is reached or exceeded with a probability of 1%.

In
accordance with the risk management standards of the international banking industry, Daimler maintains its financial controlling system independent of Corporate Treasury and with a
separate reporting line.

Exchange rate risk.Transaction risk and currency risk management.The global nature of
Daimler's businesses exposes cash flows and earnings to risks arising from fluctuations in exchange rates. These risks primarily relate to fluctuations between the US dollar as well as other important
currencies and the euro.

In
accordance with its internal guidelines, Daimler refinances receivables denominated in foreign currencies, which relate to the Group's invested liquidity, in the same foreign
currencies. As a result, the Group is not exposed to significant exchange rate risks.

Payables
in foreign currencies that result from the Group's refinancing are generally hedged against currency risks at the time of the refinancing. The Group uses appropriate derivative
financial instruments to hedge against currency risk.

In
the operating vehicle businesses, the Group's exchange rate risk primarily arise when revenue is generated in a currency that is different from the currency in which the costs of
generating the revenue are incurred (so-called transaction risk). When the revenue is converted into the currency in which the costs are incurred, it may be inadequate to cover the costs
if the value of the currency in which the revenue is generated declined in the interim relative to the value of the currency in which the costs were incurred. This risk exposure primarily affects the
Mercedes-Benz Cars segment, which generates a major portion of its revenue in foreign currencies and incurs manufacturing costs primarily in euro. The Daimler Trucks segment is also
subject to transaction risk, but to a lesser extent because of its global production network. The Mercedes-Benz Vans and Daimler Buses segments are also directly exposed to transaction
risk, but only to a minor degree compared to the

F-81

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Mercedes-Benz
Cars and Daimler Trucks segments. In addition, through its proportionate share in the results of its equity investment in EADS, the Group is indirectly exposed to transaction
risk.

Cash
inflows and outflows of the business segments are offset if they are denominated in the same currency. This means that the exchange rate risk resulting from revenue generated in a
particular currency can be offset by costs in the same currency, even if the revenue arises from a transaction independent of that in which the costs are incurred. As a result, only the unmatched
amounts are subject to transaction risk. In addition, natural hedging opportunities exist to the extent that currency exposures of the operating businesses of individual segments offset each other at
Group level, thereby reducing overall currency exposure. These natural hedges eliminate the need for hedging to the extent of the matched exposures. To provide an additional natural hedge against any
remaining transaction risk exposure, Daimler strives, where appropriate, to increase cash outflows in the same currencies in which the Group has a net excess inflow.

In
order to mitigate the impact of currency exchange rate fluctuations for the operating business (future transactions), Daimler continually assesses its exposure to exchange rate risks
and hedges a portion of those risks by using derivative financial instruments. Daimler's Foreign Exchange Committee (FXCo) manages the Group's exchange rate risk and its hedging transactions through
currency derivatives. The FXCo consists of the Chief Financial Officer, the head of the Investor Relations & Treasury department, the head of the Corporate Controlling department and the heads
of the Controlling departments of the relevant segments. The Corporate Treasury department assesses foreign currency exposures and carries out the FXCo's decisions concerning foreign currency hedging
through transactions with international financial institutions. Risk Controlling regularly informs the Board of Management of the actions taken by Corporate Treasury based on the FXCo's decisions.

The
Group's targeted hedge ratios for forecasted operating cash flows in foreign currency are indicated by a reference model. On the one hand, the hedging horizon is naturally limited by
the uncertainty related to cash flows that lie far in the future, and, on the other hand, it may be limited by the fact that appropriate currency contracts are not available. This reference model aims
to protect the Group from unfavorable movements in exchange rates while preserving some flexibility to participate simultaneously in favorable developments. Based on this reference model and depending
on the market outlook, the FXCo determines the hedging horizon, which usually varies from one to three years, as well as the average hedge ratios. Reflecting the character of the underlying risks, the
hedge ratios decrease with increasing maturities. At year-end 2009, the centralized foreign exchange management showed an unhedged position in the automotive business in calendar year 2010
amounting to 30% of the underlying forecasted cash flows in US dollars. The corresponding figure at year-end 2008 for calendar year 2009 was 12%. The higher unhedged position compared to
last year contributes to a higher exposure of cash flows to currency risk with respect to the US dollar.

The
hedged position is determined by the amount of derivative currency contracts held. The derivative financial instruments used to cover foreign currency exposure are primarily forward
foreign exchange contracts and currency options. Daimler's guidelines call for a mixture of these instruments depending on the view of market conditions. Value at risk is used to measure the exchange
rate risk inherent in these derivative financial instruments.

The
following table shows the period-end, high, low and average value at risk figures for the 2009 and 2008 portfolio of these derivative financial instruments. The average
exposure has been computed on an end-of-quarter

F-82

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

basis.
The offsetting transactions underlying the derivative financial instruments are not included in the following value at risk presentation.

2009

2008in millions of €

Period-end

High

Low

Average

Period-end

High

Low

AverageExchange rate risk (from derivative financial instruments)


177


692


165


337


572


572


253


380


The
average value at risk of the financial instruments used to hedge exchange rate risks decreased in 2009 as a result of lower exchange rate volatilities.

Effects of currency translation.For purposes of Daimler's consolidated financial statements, the income and expenses and the assets
and liabilities
of subsidiaries located outside the euro zone are converted into euro. Therefore, period-to-period changes in average exchange rates may cause translation effects that have a
significant impact on, for example, revenue, segment results (earnings before
interest and taxesEBIT) and net profit or loss of the Group. Unlike exchange rate transaction risk, exchange rate translation risk does not necessarily affect future cash flows. The
Group's equity position reflects changes in book values due to exchange rates. Daimler does not hedge against exchange rate translation risk.

In
2009, 2008 and 2007, currency effects negatively affected our operating results.

Interest rate risk.Daimler uses a variety of interest rate sensitive financial instruments to manage the liquidity and cash
needs of its
day-to-day operations. A substantial volume of interest rate sensitive assets and liabilities results from the leasing and sales financing business which is operated by the
Daimler Financial Services segment. The Daimler Financial Services companies enter into transactions with customers that primarily result in fixed-rate receivables. Daimler's general
policy is to match funding in terms of maturities and interest rates, where economically feasible. However, for a limited portion of the receivables portfolio in selected and developed markets, the
Group does not match funding in terms of maturities in order to take advantage of market opportunities. As a result, Daimler is exposed to risks due to changes in interest rates. In this regard, the
Group does not create liquidity risks since finance and leasing contracts are funded with matching maturities.

An
asset/liability committee consisting of members of the Daimler Financial Services segment, the Corporate Treasury department and the Corporate Controlling department manages the
interest rate risk relating to Daimler's leasing and financing activities by setting targets for the interest rate risk position. The Treasury Risk Management department and the local Daimler
Financial Services companies are jointly responsible for achieving these targets. As a separate function, the Daimler Financial Services Risk Management department monitors target achievement on a
monthly basis. In order to achieve the targeted interest rate risk positions in terms of maturities and interest rate fixing periods, Daimler generally uses derivative financial instruments, such as
interest rate swaps, forward rate agreements, swaptions and caps and floors. Daimler assesses its interest rate risk position by comparing assets and liabilities for corresponding maturities,
including the impact of the relevant derivative financial instruments.

Derivative
financial instruments are also used in conjunction with the refinancing related to the industrial business. Daimler coordinates the funding activities of the industrial and
financial services businesses at the Group level.

F-83

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DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

The
following table shows the period-end, high, low and average value at risk figures for the 2009 and 2008 portfolio of interest rate sensitive financial instruments of the
Group, including the leasing and
sales financing business. The average values have been computed on an end-of-quarter basis.

2009

2008in millions of €

Period-end

High

Low

Average

Period-end

High

Low

AverageInterest rate risk


49


49


33


41


13


163


13


79


The
average value at risk of the interest rate sensitive financial instruments decreased in 2009 due to lower interest rate volatilities.

Commodity price risk.Daimler is exposed to the risk of changes in raw material prices in connection with procuring raw
materials and manufacturing
supplies used in production. Some of the raw material price risk, primarily relating to procuring of certain metals, is mitigated with the use of derivative financial instruments.

The
following table shows the period-end, high, low and average value at risk figures for the 2009 and 2008 portfolio of derivative financial instruments used to hedge raw
material price risk. The average exposure has been computed on an end-of-quarter basis. The offsetting transactions underlying the derivative financial instruments are not
included in the following value at risk presentation.

2009

2008in millions of €

Period-end

High

Low

Average

Period-end

High

Low

AverageCommodity price risk (from derivative financial instruments)


24


35


21


27


41


45


5


25


The
period-end value at risk of financial instruments used to hedge commodity price risks decreased in 2009 as a result of lower commodity price volatilities.

Equity price risk.Daimler holds investments in marketable equity securities and equity derivatives. In line with international
banking standards,
the Group does not include investments in marketable equity securities that it classifies as long-term investments in its equity price risk assessment. Also not included in this assessment
are equity derivatives used to hedge the market price risk of investments accounted for
using the equity method. The remaining equity price risk in the years 2009 and 2008 was not, and is not currently, material to Daimler.

31. Segment reporting

At the beginning of 2009, the Group adjusted its segment reporting. The business activities of Mercedes-Benz Vans and
Daimler Buses, which were previously reported as part of Vans, Buses, Other, are now presented separately. The other business activities of the Group which previously also formed part of Vans, Buses,
Other (amongst others EADS as well as Chrysler until June 3, 2009) are included in the column "Reconciliation" together with other corporate items and eliminations of intersegment transactions.
Prior-year figures have been adjusted accordingly.

The
segment information presented below does not include amounts relating to discontinued operations. The segment assets and liabilities as well as capital expenditures, depreciation and
amortization of the discontinued operations in 2007 are included in the reconciliation to the consolidated amounts.

Reportable segments.The reportable segments of the Group are Mercedes-Benz Cars, Daimler Trucks, Mercedes-Benz Vans, Daimler
Buses and Daimler Financial Services. The segments are largely organized and managed separately according to nature of products and services provided, brands, distribution channels and profile of
customers.

F-84

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

The
vehicle segments develop and manufacture passenger cars and off-road vehicles, trucks and buses. Mercedes-Benz Cars sells its passenger cars and
off-road vehicles under the brand names Mercedes-Benz, smart and Maybach. Daimler Trucks distributes its trucks under the brand names Mercedes-Benz, Freightliner,
Western Star and Fuso. The vans of the Mercedes-Benz Vans segment are primarily sold under the brand name Mercedes-Benz. Daimler Buses sells completely built-up
buses under the brand names Mercedes-Benz, Setra and Orion. In addition, Daimler Buses produces and sells bus chassis. The vehicle segments also sell related spare parts and accessories.

The
Daimler Financial Services segment supports the sales of the Group's vehicle segments worldwide. Its product portfolio mainly comprises tailored financing and leasing packages for
customers and dealers. The segment also provides services such as insurance, fleet management, investment products and credit cards.

Management reporting and controlling systems.The Group's management reporting and controlling systems principally use
accounting policies that are
the same as those described in Note 1 in the summary of significant accounting policies under IFRS.

The
Group measures the performance of its operating segments through a measure of segment profit or loss which is referred to as "EBIT" in our management and reporting system.

EBIT
is the measure of segment profit (loss) used in segment reporting and comprises gross profit, selling and general administrative expenses, research and non-capitalized
development costs, other operating income and expense, and our share of profit (loss) from investments accounted for using the equity method, net, as well as other financial income (expense), net.

Intersegment
revenue is generally recorded at values that approximate third-party selling prices.

Segment
assets principally comprise all assets. The industrial business segments' assets exclude income tax assets, assets from defined benefit plans and certain financial assets
(including liquidity).

Segment
liabilities principally comprise all liabilities. The industrial business segments' liabilities exclude income tax liabilities, liabilities from defined benefit plans and certain
financial liabilities (including financing liabilities).

Pursuant
to risk sharing agreements between Daimler Financial Services and the respective vehicle segments the residual value risks associated with the Group's operating leases and its
finance lease receivables are primarily borne by the vehicle segments that manufactured the leased equipment. The terms of the risk sharing arrangement vary by segment and geographic region.

Non-current
assets comprise of intangible assets, property, plant and equipment and equipment on operating leases.

Capital
expenditures for property, plant and equipment and intangible assets reflect the cash effective additions to these property, plant and equipment and intangible assets as far as
they do not relate to capitalized borrowing costs or goodwill and finance leases.

With
respect to information about geographical regions, revenue is allocated to countries based on the location of the customer; non-current assets are disclosed according to
the physical location of these assets.

F-85

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DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Segment information as of and for the years ended December 31, 2009, 2008 and 2007:

in millions of €

Mercedes-Benz
Cars

Daimler
Trucks

Mercedes-Benz
Vans

Daimler
Buses

Daimler
Financial
Services

Total
Segments

Reconciliation

Consolidated2009Revenue


40,205


16,633


6,002


4,173


11,366


78,379


545


78,924Intersegment revenue


1,113


1,727


213


65


630


3,748


(3,748
)

Total revenue


41,318


18,360


6,215


4,238


11,996


82,127


(3,203
)

78,924Segment profit (loss) (EBIT)


(500
)

(1,001
)

26


183


9


(1,283
)

(230
)

(1,513
)Thereof share of profit (loss) from investments accounted for using the equity method


(3
)

(4
)

(13
)




7


(13
)

85


72Segment assets


32,452


14,317


4,585


2,806


65,059


119,219


9,602


128,821Thereof investments accounted for using the equity method


101


220


60


2


54


437


3,858


4,295Segment liabilities


21,978


8,020


3,109


1,728


60,389


95,224


1,770


96,994Additions to non-current assets


8,263


1,518


574


318


4,527


15,200


(560
)

14,640Thereof capital expenditures for intangible assets


967


427


9


10


7


1,420


2


1,422Thereof capital expenditures for property, plant and equipment


1,618


597


113


78


14


2,420


3


2,423Depreciation and amortization of non-current assets


2,732


1,045


476


132


2,571


6,956


(242
)

6,714Thereof amortization of intangible assets


597


129


74


11


19


830


(2
)

828Thereof depreciation of property, plant and equipment


1,511


619


229


59


14


2,432


4


2,436


F-86

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)



in millions of €

Mercedes-Benz
Cars

Daimler
Trucks

Mercedes-Benz
Vans

Daimler
Buses

Daimler
Financial
Services

Total
Segments

Reconciliation

Consolidated2008Revenue


46,480


26,018


9,157


4,739


11,359


97,753


716


98,469Intersegment revenue


1,292


2,554


322


69


605


4,842


(4,842
)

Total revenue


47,772


28,572


9,479


4,808


11,964


102,595


(4,126
)

98,469Segment profit (loss) (EBIT)


2,117


1,607


818


406


677


5,625


(2,895
)

2,730Thereof share of profit (loss) from investments accounted for using the equity method


75


12


(8
)




31


110


(1,108
)

(998
)Segment assets


33,956


16,936


5,243


2,920


67,708


126,763


5,462


132,225Thereof investments accounted for using the equity method


154


228


86


1


61


530


3,719


4,249Segment liabilities


20,611


9,651


3,351


1,646


63,076


98,335


1,160


99,495Additions to non-current assets


7,352


2,104


680


332


5,451


15,919


(514
)

15,405Thereof capital expenditures for intangible assets


1,133


451


10


4


20


1,618


1


1,619Thereof capital expenditures for property, plant and equipment


2,246


991


150


117


41


3,545


14


3,559Depreciation and amortization of non-current assets


2,439


949


464


125


2,500


6,477


99


6,576Thereof amortization of intangible assets


635


104


75


12


19


845


1


846Thereof depreciation of property, plant and equipment


1,325


542


239


52


16


2,174


3


2,177


F-87

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)



in millions of €

Mercedes-Benz
Cars

Daimler
Trucks

Mercedes-Benz
Vans

Daimler
Buses

Daimler
Financial
Services

Total
Segments

Reconciliation

Consolidated2007Revenue


51,175


26,198


9,071


4,190


10,427


101,061


508


101,569Intersegment revenue


1,255


2,268


270


160


540


4,493


(4,493
)

Total revenue


52,430


28,466


9,341


4,350


10,967


105,554


(3,985
)

101,569Segment profit (loss) (EBIT)


4,753


2,121


571


308


630


8,383


327


8,710Thereof share of profit (loss) from investments accounted for using the equity method


(61
)

16


1


1


2


(41
)

1,094


1,053Segment assets


30,070


15,454


5,401


2,758


62,002


115,685


19,409


135,094Thereof investments accounted for using the equity method


177


114


54


1


189


535


4,499


5,034Segment liabilities


21,514


9,557


3,599


1,545


57,612


93,827


3,037


96,864Additions to non-current assets


6,085


1,821


657


229


6,147


14,939


7,010


21,949Thereof capital expenditures for intangible assets


770


344


10


8


24


1,156


198


1,354Thereof capital expenditures for property, plant and equipment


1,910


766


138


92


29


2,935


1,312


4,247Depreciation and amortization of non-current assets


2,436


905


500


114


2,313


6,268


2,858


9,126Thereof amortization of intangible assets


748


111


77


13


13


962


116


1,078Thereof depreciation of property, plant and equipment


1,198


497


250


50


17


2,012


1,056


3,068


Mercedes-Benz Cars.As a result of the agreement with McLaren Group Ltd. in November 2009 to change the form of cooperation,
 the
Group incurred a pre-tax expense of €87 million (see also Note 34). Also in 2009, a risk sharing agreement between Daimler and its independent dealers in
connection with residual values was modified, which resulted in a pre-tax expense of €79 million (see also Note 13).

In
2008, as a result of the reassessment of residual values of leased vehicles, the Group recorded non-cash effective impairment charges of
€465 million. In addition, an amendment of a defined benefit plan resulted in past service income of €84 million.

Daimler Trucks.In 2009 and 2008, expenses of €95 million and €233 million, respectively, associated
with the decision to optimize and reposition the business operations of Daimler Trucks North America are included in the segment's EBIT. Of these amounts, €68 million and
€32 million, respectively, relate to non-cash charges (see also Note 4). The decision made in 2009 for a major realignment of the business operations of
Mitsubishi Fuso Truck and Bus Corporation (MFTBC) led to charges of €245 million in 2009. From this amount, €50 million relate to non-cash
charges (see also Note 4).

In
2008, an amendment of a defined benefit plan resulted in past service income of €29 million.

In
2007, EBIT was positively impacted by a gain of €78 million from the disposal of real-estate properties (see also Note 2). Furthermore,
changes to existing pension plans at MFTBC resulted in a curtailment gain of €86 million in 2007.

Daimler Financial Services.In 2009, EBIT includes expenses of €100 million from the sale of non-automotive assets
and from the valuation of assets held for sale (see Notes 2 and 18).

F-88

---





DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Reconciliations.Reconciliations of the total segment amounts to respective items included in financial statements are as
follows:

in millions of €

2009

2008

2007Total segments' profit (loss) (EBIT)


(1,283
)

5,625


8,383Share of profit (loss) from investments accounted for using the equity method1,2


85


(1,108
)

1,094Other corporate items


(483
)

(1,797
)

(802
)Eliminations


168


10


35Group EBIT


(1,513
)

2,730


8,710Interest income (expense), net


(785
)

65


471Profit (loss) before income taxes


(2,298
)

2,795


9,181Total segments' assets


119,219


126,763


115,685Investments accounted for using the equity method1


3,858


3,719


4,499Income tax assets3


2,536


3,110


1,940Unallocated financial assets (including liquidity) and assets from defined benefit plans3


13,346


7,975


18,119Other corporate items and eliminations


(10,138
)

(9,342
)

(5,149
)Group assets


128,821


132,225


135,094Total segments' liabilities


95,224


98,335


93,827Income tax liabilities3


950


(81
)

(218
)Unallocated financial liabilities and liabilities from defined benefit plans3


10,709


9,998


9,546Other corporate items and eliminations


(9,889
)

(8,757
)

(6,291
)Group liabilities


96,994


99,495


96,864


1Includes
mainly the Group's proportionate shares in the investments and results of EADS, Tognum and Chrysler. For further information see Note 12.2The
amounts for 2008 and 2007 also include realized gains of €130 million and €1,452 million, respectively, in connection with the transfer
of equity interests in EADS.3Industrial
business.


The reconciliation includes corporate items for which headquarters are responsible. Transactions between the segments are eliminated in the
context of consolidation and the eliminated amounts are included in the reconciliation.

Within
the reconciliation to Group EBIT, the line item "Other corporate items" includes Chrysler related expenses of €0.3 billion in 2009 and
€1.8 billion in 2008. In addition, in 2008 and 2007, this line item includes gains realized on sales of real estate properties (2008:
€449 millionreal estate properties at Potsdamer Platz; 2007: €73 millionGroup's 50%-interest in Wohnstätten
Sindelfingen).

For
2007, the reconciliation to Group additions to non-current assets includes additions of Chrysler activities of €6,952 million. Of this amount,
€1,320 million and €191 million relate to capital expenditures for property, plant and equipment and for intangible assets, respectively.

The
reconciliation to consolidated totals for depreciation and amortization of non-current assets for 2007 also includes depreciation and amortization of Chrysler activities
of €2,828 million. That total includes €1,022 million

F-89

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

and
€108 million relating to depreciation of property, plant and equipment and amortization of intangible assets, respectively.

Revenue and non-current assets by region.Revenue from external customers is as follows:

in millions of €

Germany

Western
Europe1

United
States

Other
American
countries

Asia

Other
countries

Consolidated2009


18,788


17,670


16,569


6,159


12,435


7,303


78,9242008


21,832


24,444


19,956


7,723


13,840


10,674


98,4692007


22,582


27,171


21,846


7,310


11,918


10,742


101,569


1Excluding
Germany.


The split of non-current assets by region is as follows:

in millions of €

2009

2008

2007Germany


23,452


21,426


19,542USA


8,937


10,759


11,819Other countries


8,861


8,687


8,12941,250


40,872


39,490


32. Capital management

"Net assets" and "value added" represent the basis for capital management at Daimler. The assets and liabilities of the segments in
accordance with IFRS provide the basis for the determination of net assets at Group level. The industrial segments are accountable for the operational net assets; all assets, liabilities and
provisions which they are responsible for in day-to-day operations are therefore allocated to them. Performance measurement at Daimler Financial Services is on an equity basis,
in line with the usual practice in the banking business. Net assets at Group level additionally include assets and liabilities from income taxes as well as other corporate items and eliminations. The
average annual net assets are calculated from the average quarterly net assets.

The
average quarterly net assets are calculated as an average of the net assets at the beginning and the end of the quarter and are as follows:

in millions of €

2009

2008Mercedes-Benz Cars


11,373


10,475Daimler Trucks


6,720


6,340Mercedes-Benz Vans


1,728


1,836Daimler Buses


1,221


1,308Daimler Financial Services1


4,671


4,478Net assets of the segments


25,713


24,437Investments accounted for using the equity method2


3,591


4,152Assets and liabilities from income taxes3


2,944


1,941Other corporate items and eliminations3


(470
)

936Net assets Daimler Group


31,778


31,466






F-90

---







DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

The cost of capital of the Group's average net assets is reflected in "value added." Value added shows to which extent the Group achieves or exceeds the minimum
return requirements of the shareholders and creditors, thus creating additional value. The required rate of return on net assets, and thus the cost of capital, are derived from the minimum rates of
return that investors expect on their invested capital. The Group's cost of capital comprises the cost of equity as well as the costs of debt and pension obligations of the industrial business; in
addition, the expected returns on liquidity and on the plan assets of the pension funds of the industrial business are considered with the opposite sign. In the reporting period, the cost of capital
used for our internal capital management amounted to 8% after taxes.

The
objective of capital management is the optimization of the cost of capital, which is achieved on the one hand by the management of the net assets which are in the operational
responsibility of the segments. In addition, taking into account legal regulations, Daimler strives to optimize the capital structure and, consequently, the cost of capital under cost and risk
aspects. The share buyback in 2008 and 2007 was one of the measures to improve the capital structure (see Note 19).

33. Earnings (loss) per share

The computation of basic and diluted earnings (loss) per share for net profit (loss) from continuing operations is as follows:

in millions of € or millions of shares

2009

2008

2007Profit (loss) attributable to shareholders of Daimler AG


(2,640
)

1,348


3,979Diluting effects in net profit (loss)








Profit (loss) attributable to shareholders of Daimler AGdiluted


(2,640
)

1,348


3,979Weighted average number of shares outstandingbasic


1,003.8


957.7


1,037.8Dilutive effect of stock options





2.2


9.5Weighted average number of shares outstandingdiluted


1,003.8


959.9


1,047.3


The computations of diluted earnings per share for 2009, 2008 and 2007, do not include stock options for the acquisition of 22.4 million,
11.3 million and 7.8 million Daimler ordinary shares, respectively, that were issued in connection with the stock option plan, because the options' underlying exercise prices were higher
than the average market prices of Daimler ordinary shares in those periods.

34. Related party relationships

Associated companies and joint ventures.Most of the goods and services supplied within the ordinary
course of business between the Group and related parties comprise transactions with associated companies and joint ventures and are included in the following table:

Sales of goods
and services
and other income

Purchases of goods
and services and
other expense

Receivables
At December 31,

Payables
At December 31,in millions of €

2009

2008

2007

2009

2008

2007

2009

2008

2009

2008Associated companies


936


1,738


504


1,132


1,526


523


146


588


27


1,370Joint ventures


504


602


624


54


306


50


106


133


178


264


Income and expenses resulting from transactions with Chrysler that occurred before the redemption of the remaining 19.9% equity interest in
Chrysler Holding LLC (Chrysler Holding) on June 3, 2009 are included in the above table in the line "Associated companies." Therein included is a gain before income taxes of
€0.1 billion in

F-91

---



DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

connection
with the legal transfer of Chrysler's international sales activities to Chrysler in the first quarter of 2009. In addition, the Group has agreed to pay US $600 million in total to
Chrysler's pension plans in connection with the redemption of the 19.9% equity interest in Chrysler Holding (see Note 2); the respective expenses resulting from this agreement are also included
in the above table. Due to the redemption of the equity interest in Chrysler Holding, receivables and payables at December 31, 2009 did not have to be reported.

In
November 2009, in connection with the realignment of the Group's Formula 1 activities, Daimler agreed with McLaren Group Ltd. (McLaren), one of Daimler's associated companies,
to change the form of cooperation. In two steps, McLaren will buy-back the 40% equity interest in McLaren owned by the Daimler Group; in November 2009, McLaren already took over a 28.6%
interest from Daimler. The remaining stake will be acquired by McLaren at a fixed price by the end of 2011. As of December 31, 2009, the carrying amount of the Group's remaining investment in
McLaren amounted to €26 million. In the context of the transaction, the Group has consented to compensate for its existing obligations, for example to support McLaren's research
and development activities until the end of 2011, with a lump sum payment. In addition, the Group committed to continue supplying McLaren with Formula 1 engines. The agreement between Daimler and
McLaren Automotive Ltd., a wholly owned subsidiary of McLaren Group Ltd., relating to the production of the Mercedes McLaren SLR sports car was terminated at the end of 2009. As a result
of disposing of its equity interest, the Daimler Group no longer has a significant influence on McLaren's business operations. For this reason, in November 2009, the Group ceased to account for its
equity interest in McLaren using the equity method of accounting.

Income
and expenses resulting from transactions with McLaren that occurred before that date are included in the above table. As a result of the agreement with McLaren, the Group recorded
expenses of €87 million in 2009 that were allocated to the Mercedes-Benz Cars segment and are not reflected in the above table.

In
addition, major other goods and services supplied or received by the Group relate to transactions with our associated company Tognum AG (Tognum). The Group acquired its equity
interest in Tognum in 2008 (see Note 2).

At
the end of 2009, based on contractual arrangements, the Group agreed with Kamaz OAO, another associated company, to establish two joint ventures. The purpose of the joint ventures is
the distribution and, with respect to some truck lines, the assembly of Mercedes-Benz and Fuso trucks and the sale of Mercedes-Benz and Setra buses in Russia.

The
transactions with joint ventures predominantly comprise the business relationship with Beijing Benz-DaimlerChrysler Automotive Co., Ltd. (BBDC). BBDC
assembles and distributes Mercedes-Benz vehicles for the Group in China.

In
2008, Daimler recognized additional charges of €293 million in connection with the transfer of the majority interest in Chrysler and paid
€186 million to BBDC. In 2009, Daimler paid €42 million to BBDC. As of December 31, 2009, provisions in this regard amounted to
€174 million (see Note 2 for further information). These recognized charges and provisions are included in the table above under "Joint ventures."

In
addition, major other goods and services supplied by the Group relate to transactions with the joint venture MTU Detroit Diesel Australia Pty. Ltd. (MTU). MTU sells
off- and on-highway engines and transmissions for commercial vehicles.

Revenue
resulting from these sales transactions is included in the above table in the line "Joint ventures."

In
connection with the Group's 45% equity interest in Toll Collect, Daimler has provided a number of guarantees for Toll Collect which are not included in the table above (see
Note 28 for further information).

During
the first quarter of 2008, the transaction under which Daimler, Ford Motor Company (Ford) and Ballard Power Systems, Inc. (Ballard) reorganized their automotive fuel cell
activities was closed. As a result of

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DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

this
transaction, Ballard repurchased all of its shares held by Daimler or Ford and the representatives of Daimler and Ford resigned from Ballard's board of directors. As consideration, Daimler
received a 50.1% interest in AFCC Automotive Fuel Cell Cooperation Corporation (AFCC), a newly formed company that comprises Ballard's automotive fuel cell business. Furthermore the Group received
rights and know-how related to fuel cell technology and cash of €24 million; Ford and Ballard hold the remaining interest in AFCC. Daimler realized a gain before
income taxes of €30 million from the sale of its interest in Ballard, which is included in "share of profit (loss) from companies accounted for using the equity method, net," in
the 2008 consolidated statements of income. As Daimler and Ford jointly manage the operations of AFCC, Daimler accounts for its investment in AFCC using the equity method. Balances and transactions
with respect to AFCC are included in the line "Joint ventures" in the table above.

Board members.Throughout the world, the Group has business relationships with numerous entities that are customers and/or
suppliers of the Group.
Those customers and/or suppliers include companies that have a connection with some of the members of the Supervisory Board or of the Board of Management of Daimler AG or its subsidiaries.

From
time to time, companies of the Daimler Group purchase goods and services (primarily advertising) from and sell or lease vehicles or provide financial services to companies of the
Lagardère Group in the ordinary course of business. Arnaud Lagardère, who became a member of the Supervisory Board of Daimler AG in April 2005, is the general partner and
Chief Executive Officer of Lagardère SCA, a publicly traded company and the ultimate parent company of the Lagardère Group.

In
2007, Mr. Mark Wössner (a former member of Daimler AG's Supervisory Board) received, together with two associates, rental payments for the rental of premises
from Westfalia Van Conversion GmbH (Westfalia). The rental payments received in 2007 amounted to €0.9 million. The Group sold its 100% equity interest in Westfalia in
October 2007. Mark Wössner's term of office expired on April 8, 2009.

Daimler
incurred expenses of US $0.7 million in 2007 for advertising and marketing actions in a US magazine. Earl G. Graves, a former member of the Supervisory Board of Daimler
AG, was Chairman, Chief Executive Officer and sole proprietor of that magazine's ultimate parent company at that time.

For
information on the remuneration of board members, see Note 35.

Shareholders.The Group distributes vehicles in Turkey through a dealership which also holds a minority interest in one of the
Group's subsidiaries.
In addition, the Group has business relationships with vehicle importers in certain other countries that also hold minority interest in Group companies. Revenue generated by these transactions
amounted to €0.2 billion in 2009 (2008: €0.2 billion; 2007: €0.2 billion). Related to these transactions, the Group incurred
expenses of €27 million in 2009 (2008: €36 million), resulting primarily from the depreciation of purchased vehicles.

35. Remuneration of the members of the Board of Management and the Supervisory Board

Board of Management remuneration.The total remuneration granted by Group companies to the members of the Board of Management of
Daimler AG is
calculated from the total amounts of remuneration paid in cash (base salary and annual bonus), the value of the Group's personnel expense or income recognized from share-based remuneration, and the
total of non-cash benefits in kind that are subject to income tax. Further information on share-based remuneration is provided in Note 20.

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DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

In 2009, total remuneration comprised €4.8 million as fixed, i.e. non-performance-related remuneration (2008:
€6.2 million; 2007: €7.2 million) and €1.8 million as short-term variable, i.e. short-term
performance-related remuneration (2008: €1.5 million; 2007: €17.0 million). In addition, there was expense for the Group of
€4.5 million as variable performance-related remuneration with a medium and long-term incentive effect granted in 2009 and previous years (2008: income of
€22.5 million; 2007: expense of €30.3 million). In total, this adds up to expense for the Group of €11.1 million for the year 2009
(2008: income of €14.8 million; 2007: expense of
€54.5 million). The income from share-based remuneration in the year 2008 resulted from the release of provisions following the negative share-price development. The amounts
stated for fixed and short-term performance-related remuneration for the year 2007 also include payments to Board of Management members who resigned from their positions in the context of
the Chrysler transaction. For 2007, those Board of Management members also received bonus and severance payments in connection with the Chrysler transaction and their resignation from the Board of
Management in a total amount of €19.3 million.

The
decline of the fixed remuneration is based on the voluntary waiver by the Board of Management of 15% of their fixed remuneration effective from May 1, 2009 until
June 30, 2010 due to the labor costs reduction measures that were agreed Group-wide and the reduced number of Board of Management members in 2009.

The
pension agreements of the German Board of Management members which were concluded before 2005, included a commitment to an annual retirement pension, calculated as a proportion of
the base salary and depending on the years of service. Those pension rights remain and have been frozen at that level (70% for Dr. Dieter Zetsche, 69% Guenther Fleig, 60% for
Dr. Ruediger Grube and Dr. Thomas Weber, 50% for Andreas Renschler and Bodo Uebber, and 35% for Wilfried Porth).

The
pension payments begin in the form of a retirement pension when a member's contract of service ends or after his 60th birthday, or in the form of an invalidity pension when a
member's service contract ends before his 60th birthday due to disability. An annual increase of 3.5% is effected (Wilfried Porth: in accordance with applicability law). Similar to the
retirement pension of the German workforce, arrangements for widows and orphans are also included.

The
pension rights of Mr. Porth were also determined in 2005, however related to his then position and remuneration at the executive level reporting to the Board of Management.

Effective
January 1, 2006, those pension agreements were converted into a new pension system. Each Board of Management member is credited with a capital component each year. This
capital component comprises an amount equal to 15% of the sum of the Board of Management member's fixed base salary and the annual bonus that was actually achieved, multiplied by an age factor
equivalent to a certain rate of return, at present 6% (Wilfried Porth: 5%). This pension is payable at the age of 60 at the earliest.

In
the year 2009, the pension provision was increased by service costs of €1.7 million (2008: €2.5 million; 2007:
€2.2 million).

No
severance payments are foreseen for Board of Management members in the case of early termination of their service contracts. Solely in the case of early termination of a service
contract by mutual consent, the Board of Management service contracts, which are in general concluded for a period of 3 years only, include a
commitment to payment of the base salary and to provision of a company car until the end of the original service period. Such persons are only entitled to payment of the performance-related component
of remuneration pro rata for the period until they leave the Group. Entitlement to payment of the performance-related component of remuneration with a long-term incentive is defined by the
exercise conditions specified in the respective plans. For the period beginning after the end of original service period, Board of Management members can receive pension payments in the amounts of the
commitments granted until 2005 as described in the previous section, as well as the use of a company car.

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DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

As
a result of these provisions and the fact that in accordance with a Supervisory Board resolution of 2006, Daimler AG Board of Management service contractsboth initial
contracts and extensionsgenerally have a term of only three years, Daimler AG is significantly below the limit for severance compensation of two years' remuneration suggested by the
German Corporate Governance Code.

The
payments made in 2009 to former members of the Board of Management of Daimler AG and their survivors amounted to €16.1 million (2008:
€19.1 million; 2007: €67.9 million). The pension provisions for former members of the Board of Management and their survivors amounted to
€192.8 million as of December 31, 2009 (2008: €167.0 million).

No
advances or loans were made to members of the Board of Management of Daimler AG.

Supervisory Board remuneration.The remuneration paid in 2009 to the members of the Supervisory Board of Daimler AG for their
services to the Group
totaled €2.6 million (2008: €2.8 million; 2007: €2.1 million).

In
the Supervisory Board meeting on April 30, 2009, the Supervisory Board members decided unanimously to waive 10% of the respective individual Supervisory Board remuneration
including meeting fees to support the labor cost reductions, effective from May 1, 2009, until June 30, 2010.

Except
for the remuneration paid to the members of the Supervisory Board representing the employees in accordance with their contracts of employment, no remuneration was paid for
services provided personally beyond the aforementioned board and committee activities, in particular for advisory or agency services in 2009, 2008 and 2007.

No
advances or loans were made to members of the Supervisory Board of Daimler AG.

36. Principal accountant fees

The fees billed by the independent auditors KPMG for professional services in 2009, 2008 and 2007 are comprised of:

2009

2008

2007in millions of €Audit fees


44


50


63Audit related fees


2


2


3Tax fees


.


1


2All other fees


1


2


347


55


71


37. Additional information

Application of Section 264, Subsection 3 and Section 264b of the German Commercial Code (HGB).Several
consolidated companies of
Daimler AG qualify for Section 264, Subsection 3 and Section 264b of the German Commercial Code (HGB), and the consolidated financial statements of Daimler AG therefore release
these subsidiaries from the requirement to disclose their annual financial statements. The companies marked with an asterisk (*) also qualify for release from the requirement to prepare a management
report:



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DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)



F-96

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DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)



Information on investments.Information regarding our investments pursuant section 313 of the German Commercial Code (HGB)
is provided
separately.

German Corporate Governance Code.The Board of Management and the Supervisory Board of Daimler AG have issued a declaration
pursuant to
Section 161 of the German Stock Corporation Act and have made it permanent available to their shareholders on Daimler's website at 
http://www.daimler.com/Projects/c2c/channel/documents/1790925_daimler_declaration_91216_e.pdf.

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DAIMLER AG AND SUBSIDIARIES

Notes to the Consolidated Financial Statements  (Continued)

Third-party companies.At December 31, 2009, the Group was a shareholder of a company that meets the criteria of a
significant third-party
company according to the German Corporate Governance Code:

Name of the company


Tata Motors LimitedHeadquarters of the company


Mumbai, IndiaEquity interest in %1


4.71Total equity in millions of €2


881Net profit in millions of €2


(386
)


1As
of December 31, 2009.2Based
on national consolidated financial statements for the year ended March 31, 2009.


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