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:
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 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 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.