Reporting analysis: Daimler-Chrysler (1998-2006)

Résumé du document

We assume for the analysis of the group that the impact of IFRS in year 2004 is insignificant given that IFRS and US GAAP are closed. Moreover a complete analysis was impossible given that we didn't have all the figures before 2004. From 1998 to 2006 we can see that inventories increased from $11,796 to $17,750. At the same time Sales increased, slightly, from $131,782 to $151,589 thus the inventory turnover in terms of the number of days increased from 37 to 43 days with a top in 2005 at 47 days. In 2000, the increase in inventories was mainly due to higher stocks of used vehicles at Commercial Vehicles, especially in North America. Mercedes-Benz Passenger Cars also contributed to the increase in inventories due to the growth in business and upcoming new product launches. In 2001 the increase in inventories was primarily caused by the market launch of new products in the Mercedes-Benz Passenger Cars & smart segment (€0.9 billion). The de-consolidation of the Adtranz Group had an offsetting effect of €0.5 billion. In 2002 inventories increased by 10.3 billion, in particular as a result of pending market launches for new products in the Mercedes Car Group and higher levels of used vehicles in the Services Division. On the other hand, the inventory in the Chrysler Group Division decreased.

Extraits

[...] Thus it has been decided future agreement between Nissan and Chrysler: Nissan will provide small cars to Chrysler in order to face the Japanese and Korean competitors. This new alliance should permit to Chrysler to be more competitive with a larger game of products and thus to increase its revenues. But this operation is risky because it represents a big challenge and needs a strong ability to manage the changes in the sector's environment. Finally, a new important point is the will of the group to produce environmentally friendly vehicles to be in accordance with the objectives of reduction of CO2 emissions and to respond to the will of the clients which is to have vehicles which consume less oil because the price become more and more high. [...]

[...] A reduction of 1.6 billion in trade receivables occurred mainly due to the deconsolidation of Adtranz 0.7 billion) and a decrease 0.3 billion) at the Mercedes-Benz Passenger Cars & smart segment, while other receivables rose by 2.2 billion. Besides positive currency effects, an increase occurred in other receivables because of the higher market values of derivative financial instruments and higher retained interests in sold receivables. In 2002, trade accounts receivable decreased to 16.3 billion (2001: 16.4 billion). The reduction was mainly influenced by currency exchange rate effects, offset by an increase at Chrysler Group due to higher sales. [...]

[...] However we see that the level of working capital for European automotive sector is much smaller than Daimler- Chrysler's one. This is due to the fact in our calculation of Daimler- Chrysler group we take into account not only the industrial business but also the financial services. As we saw in the study of receivable, the high amount of receivable is due for two third to receivables from financial services. Let's have a look of the working capital for industrial business only to have a relevant comparison with automotive sector. [...]

[...] These liquidity reserves include a pool of receivables from the Financial Services business which are readily available for securitization in the capital market, as well as confirmed syndicated credit lines with varying maturities / Operating cash flows Cash from operating activities stays quite stable along the analysis period. In 2000, operating cash flows decreased to 16 billion euros (1999: 18 billion). The decline was principally caused by lower profit contributions from the Chrysler group and Services segment, which were mainly the result of the intensified competitive situation in North America. [...]

[...] In total, the effect of these downgradings were regarded as likely to increase DC's cost of debt, and because of lower short term debt rating, it was expected that the corporation would be prevented from speculating and taking advantage of the offerings in the commercial paper market, a market in which loans of 270 days and shorter are available. In 2001 the downgrading of the short term credit rating had the effect of making their short term borrowing more expensive and also reduced the volume of commercial paper that can be placed. DC began to replace short term financing with long term borrowings. [...]