Business Growth: DaimlerChrysler Off-Highway Posts Revenues of €1.75 bn

• Sales up 2%
• Strategically favorable sales breakdown
• Ships, industrial vehicles, and energy systems as main segments
• Over 26,000 engines sold
• Employee numbers remain constant

DaimlerChrysler Off-Highway, a business unit within the DaimlerChrysler group, recorded sales of 1.75 billion Euro in the 2004 financial year, 2% up on the prior year. By far the largest share of this revenue – 1.35 billion Euro– was earned by the mtu group. MTU Detroit Diesel accounted for 400 million Euro, and Industrial Drive Systems, the off-highway segment of DaimlerChrysler’s commercial vehicle production operation, contributed 100 million Euro.

Volker Heuer, head of the DaimlerChrysler Off-Highway business unit, is delighted with this sales growth, particulary in view of the fact that market conditions for globally operating European companies were again less than favorable in 2004. The diesel engine market in the off-highway segment in 2004 had not recovered to the level seen in early 2001, although the overall trend was again positive in 2004 after the slump in 2002 and 2003. Furthermore, because of the continuing weakness of the dollar, diesel engine manufacturers in the dollar zone have reaped greater benefits from the recovery in off-highway markets than their European competitors.

Strategically favorable sales breakdown

Europe is the major market for DaimlerChrysler Off-Highway. The share of revenues from Germany fell from 25% to 24%, compared with an increase from 24% to 27% of revenues for the rest of Europe. Revenues earned in the American market were down from 24% to 21%, because of the exchange rate situation, despite double-digit sales growth after adjustment for currency factors. The revenues of the Asian region remained steady at 19%. At 8% revenue in the Australia/Oceania region was also virtually unchanged from the prior year. From a strategic perspective, the overall breakdown of revenues, with approximately twenty five percent shares for Germany, Europe, America, and Asia-Pacific, is seen as a very favorable spread.

The strategy of spreading business operations over a broad base again proved its effectiveness in 2004, and enabled the DaimlerChrysler Off-Highway unit to offset declining revenues in two segments with increases elsewhere. The largest market was again the ships segment with a share of 34%, followed by the industry segment (21% of the business unit’s total revenues), energy systems (17%), and drive systems for military vehicles (12%). The Drive Shaft Product Center accounted for 9% of total sales, injection systems contributed 3%, and “other activities,” including fuel cell, electronics, and system component sales, accounted for 5%.

More than 26,000 engines sold

Total unit sales of DaimlerChrysler Off-Highway engines reached the 26,600 mark, almost 20% up on the prior year figure (22,300). A high share of this growth was for engines in the lower output range. A good example is the growing worldwide acceptance of engines of DaimlerChrysler commercial vehicle production, where unit sales were up by 1,700 in 2004.

Incoming orders in 2004 reached a total of 1.8 billion Euro, a 7% increase on 2003. The high demand for motors for stationary electricity generation impacted positively on both order volumes and sales revenues. Prior year order volumes were also significantly exceeded for ship engines, with particularly strong growth in the yacht segment and vessels operated by public authorities. Growth continues in the industry segment, particularly in the rail and mining vehicle sub-segments, along with construction and industrial vehicles. Order volumes for military vehicle engines were well down on the prior year, owing to the absence of major procurement programs in 2004.

Employee numbers steady at 7,000

At year-end 2004, DaimlerChrysler Off-Highway had a total of 7,053 employees worldwide (as compared with 7,048 in the previous year). Over 6,700 of these were employed in the mtu group. The strong presence of the business unit in Germany, where it operates with a total of 5,850 employees, reflects the high priority of that market for DaimlerChrysler Off-Highway. A major asset for the unit’s market position is its highly qualified workforce. Over 90% of the workers employed in DaimlerChrysler Off-Highway production units are skilled workers. The emphasis on skills and training is also reflected in the high number of trainees, many of whom, after traineeship, go on to take up positions in DaimlerChrysler Off-Highway. The number of trainees has grown steadily over the last few years, reaching 388 at the 2004 year-end (as compared with 349 at the end of 2003).

The success of DaimlerChrysler Off-Highway is based on its position as a technology leader and innovation driver. This explains the high priority placed on R&D, with expenditure of 107 million Euro in 2004, an increase of almost 13% year-on-year. DaimlerChrysler Off-Highway’s R&D expenditure-to-revenue ratio of 6% puts it well ahead of its competitors in this area.

DaimlerChrysler Off-Highway

DaimlerChrysler Off-Highway, a business unit of DaimlerChrysler AG, is one of the world’s leading suppliers of diesel engines and complete drive systems for ships, heavy land and rail vehicles, and stationary energy generation plants. The business unit bundles the entire off-highway business of the DaimlerChrysler group. This includes the business of the mtu group, centered around MTU Friedrichshafen GmbH, MTU Detroit Diesel as the off-highway component of the Detroit Diesel Corporation, the off-highway segments of DaimlerChrysler’s commercial vehicles division, and the stake in the Italian engine manufacturer VM Motori.

DaimlerChrysler Off-Highway is one of the world’s largest suppliers of off-highway drive and propulsion systems with total sales revenues of 1.75 billion Euro. The sales and service structure provides global presence with 16 subsidiaries, over 130 distributors and 1,000 authorized dealers. DaimlerChrysler Off-Highway sells its products under the mtu, Detroit Diesel, Mercedes-Benz, and L’Orange brands. The primary focus of DaimlerChrysler Off-Highway’s business activities is on the development, manufacture, and marketing of diesel engines and complete drive and propulsion systems in the output ranges between 20 and 9,000 kW (30–12,000 HP). The business unit produces and sells drive systems powered by diesel engines as well as gas engines, gas turbines, and stationary fuel cells, with field trials for the latter currently under way. The unit also manufactures drive shafts for PCs and light commercial vehicles, and injection systems for diesel, heavy fuel, and gas engines, produced by its subsidiary L’Orange GmbH.