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Executives

Michael Muhlbayer – Head, IR and Treasury

Dieter Zetsche – Chairman and Head of Mercedes-Benz Cars

Bodo Uebber – Finance & Controlling/Daimler Financial Services

Andreas Renschler – Head, Daimler Trucks

Analysts

Jochen Gehrke – Deutsche Bank

Christina Church – Barclays Capital

Arndt Ellinghorst – Credit Suisse

John Buckland – MF Global Securities

Daniel Schwarz – Commerzbank

Horst Schneider – HSBC

Max Warburton – Sanford Bernstein

Thierry Huon – Exane BNP Paribas

Philippe Houchoi – UBS

Jose Asumendi – RBS

Christoph Rauwald – Dow Jones Frankfurt

Christian Breitsprecher – Macquarie

Philippe Barrier – Societe Generale

Stephanie Renegar – JP Morgan

Ranjit Unnithan – JPMorgan

Christian Hessner – Reuters

Jürgen Pieper – B. Metzler seel. Sohn & Co. KGaA

Adam Hull – WestLB

Daimler AG (DAI) Q2 2010 Earnings Call Transcript July 27, 2010 7:30 AM ET

Operator

Welcome to the Global Conference Call of Daimler. At our customer's request, this conference will be recorded. A replay of the conference call along with presentation slides will also be available as an on-demand audio webcast in the Investor Relations section of the Daimler Website. A short introduction will be directly followed by a Q&A session. (Operator instructions)

I would like to remind you that this teleconference is governed by the Safe Harbor wording that you will find in our published results documents. Please note that our presentations contain forward-looking statements that reflect management's current views with respect to future events. These forward-looking statements can be identified by expressions such as assume, anticipate, believe, estimate, expect, intend, may, plan, project and should.

Such statements are subject to many risks and uncertainties, examples of which are set out in the Safe Harbor wording in our documents and are also described in our most recent Form 20-F, under the heading Risk Factors. If the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements. Forward-looking statements speak only to the date in which they are made.

May I now hand over to Dr. Michael Muhlbayer, Head of Daimler Investor Relations and Treasury. Thank you very much.

Michael Muhlbayer

Good afternoon. This is Michael Muhlbayer speaking. On behalf of Daimler, I would like to welcome you to our second quarter presentation. We are happy to have with us today, the Chairman of the Board of Management and Head of Mercedes-Benz Cars, Dr. Dieter Zetsche; the CFO, Bodo Uebber; and the Head of Daimler Trucks, Andreas Renschler. In order to give you maximum time for your questions, Dr. Zetsche will begin with a short introduction directly followed by Q&A.

Now, I would like to hand over to Dieter Zetsche.

Dieter Zetsche

Gentlemen, welcome to our second quarter conference call. You may have expected that our second quarter numbers would be good and in fact they are. Earlier this year, we promised that Daimler would emerge from the crisis generating a lot of talk. Now, we are delivering results. Sales, revenue and EBIT are all up. Year-over-year revenue increased by 28%. We posted EBIT of 2.1 billion Euros and net profit was 1.3 billion Euros. Our free cash flow is also developing very positively, despite ongoing investments in future technologies and markets.

Accordingly, Daimler’s strong industrial net liquidity position further improved. Several positive developments contributed to these results. Let me name just a few. Unit sales were up by double-digit rates in all of our divisions. Our model-mix has improved significantly. Our industrial cash flow was very strong. The same goes for our pricing. Efficiency gains and cost reductions are proving to be sustainable, and we are making substantial progress in terms of improving our regional footprint and building forward-looking corporations. Those are the headlines.

Let’s now take a closer look starting with our passenger cars division. Mercedes-Benz Cars posted EBIT of 1.4 billion Euros in the second quarter. Return on sales was 9.8%. In other words, this is already very close to our financial target of 10%. And with our almost complete renewal of our product portfolio in the coming years, we are confident to post those 10% on a sustainable basis from the end of 2012 onwards.

Now, what are the reasons for a success in the second quarter of 2010? First and foremost, our products are in great demand. Our E-Class sales nearly doubled with introduction of the new model family. Across all models from April to June, unit sales increased by 19%. In fact, last month, last month was our best June ever. A key sales driver was China. In the second quarter, which tripled our sales there compared to the same period in 2009.

At the same time, let me emphasize that as clearly as the importance of the Chinese market is growing, we are not putting all our axe into the Chinese baskets. In fact, we maintain a regionally-balanced sales structure. In the US, for example, we increased our vehicle sales by 16% and of course we won’t lose side of our home market. Granted the German market was weak in the second quarter from might add as expected. Still, Mercedes-Benz managed to increase its market share significantly.

Now, what is the situation of our commercial vehicle business? Daimler Trucks achieved an EBIT of 300 million Euros in the second quarter and a return on sales of 5.1%. Sales rose by 55% mainly driven by growth in Latin America, Indonesia, the US, and parts of Europe. However, the absolute volume in the drive markets still remained on low level. Our structural measures clearly supported the success of our trucks division. Our global excellence strategy works. Our new generation of heavy-duty engines improves our commonality rates. And with the repositioning of Fuso and Daimler Trucks North America, we have reduced breakeven further.

On the products side, our pipeline is fully loaded. In 2010 alone, we have lots of new products, including the launches of the all new Freightliner Coronado, Fuso Super Great, and Fighter. In general, our performance in the second quarter confirms the potential that Daimler Trucks can deliver in a better market environment. Next is Mercedes-Benz Vans which showed a positive earnings performance as well. EBIT rose to 127 million Euros in the second quarter. Return on sales was 6.4%. Unit sales went up by 42%, partly because of our new sales organization in the US, and partly because of the start of delivery to the Chinese market.

Daimler Buses posted EBIT of 79 million Euros in the second quarter, despite a less favorable model fix. Return on sales rose to 6.6%. The main sales driver was Latin America where teen sales were up slightly. In line with a higher sales volume of our automotive divisions, business volume at Daimler Financial Services is picking up as well. Earnings increased to 171 million Euros. This increase was primarily due to the lower cost of risk and higher interest margins. In general and throughout the financial crisis, risk management at Financial Services proved to be highly effective. Looking at the earnings development at the group level, we can state an ongoing improvement over the last quarters. Our strategy is paying off.

Now, let’s get to the outlook. What do we expect for the second half of the year? At this point, most available indicators suggest that the upswing of the world economy will continue. That’s why we expect global demand for passenger cars to grow by approximately 8% in 2010. In Western Europe, the end of (inaudible) will dampen demand, but they will mostly be on the lower end of the volume market. In the US, the market for passenger cars should recover gradually although from a low level. Demand for cars in China and India should continue to grow substantially this year.

Based on these assumptions, we expect passenger car sales of Mercedes-Benz brand to increase by double-digit rates in the full year of 2010. Sales will be supported by our very competitive model range. Worldwide demand for commercial vehicles should increase as well. Market volume in Europe is expected to be between 5% and 10% above the level of 2009, and the other major regions will show double-digit growth. Against this background, Daimler Trucks anticipates higher unit sales in 2010, with Indonesia, the US, Brazil, and Europe as main drivers. What’s more, we will launch new models and engines toward the end of the year, including for example, the Mercedes-Benz Atego and Axor Facelifts. The engines coming out of our new heavy-duty engine generation will boost demand for our trucks in the US. And in Asia, we will introduce the all new light-duty Canter.

Incoming orders significantly picked up in the second quarter and exceed current sales. Our book-to-bill ratio is developing very positively. What all of this means for our earnings in 2010? On the strength of our recent performance, we raised our EBIT guidance for the Daimler group from its ongoing business to 6 billion Euros. At Mercedes-Benz Cars, results should benefit from continued high unit sales and improved margins. That’s why we target EBIT of 4 billion Euros for the full year. Daimler Trucks will post better results in the second half of the year than in the first. For the full year, we want to achieve EBIT of approximately 1 billion Euros, thanks to our successful repositioning in North America and Asia, high order backlog and very competitive products.

Mercedes-Benz Vans will generate earnings of approximately 350 million Euros due to increased sales and efficiency in NAFTA. At Daimler Buses, we anticipate significantly positive EBIT in the magnitude of prior year. And for Daimler Financial Services, we are expecting EBIT from ongoing business of approximately 800 million Euros. Cost of risk should continue to be moderate and efficiency enhancement actions will have a positive effect. Of course, this updated outlook assumes that automotive markets will continue to be stable and the remaining risk will not materialize. This may not be the only scenario, but we are convinced it is by far the most likely. And even if external conditions were to worsen, we would still have reasons to be confident about our future. We have a balanced product portfolio and a balanced regional footprint. We significantly reduced breakeven levels. We have an efficient working capital and cost management. We have improved global material price and risk management, and we have very good access to global capital markets.

To conclude with, our starting base is rock solid, and we have defined clear goals for the future. We want to bring the operating performance of each division to benchmark level, and the results of the first half year 2010 confirm that we are well on track.

And now, Bodo Uebber, Andreas Renschler and I will be happy to answer your questions. Thank you.

Michael Muhlbayer

Thank you very much Dieter Zetsche. Ladies and gentlemen, you may ask your questions now. I will identify the questioner by name, but please also introduce yourselves with your name and the name of the organization before asking your question. Two practical points; firstly, please avoid using mobile phones and secondly, please ask your question in English. Before we start this session, the operator will explain the procedure.

Question-and-Answer Session

Operator

(Operator instructions)

Michael Muhlbayer

Okay, first in line is Jochen Gehrke. Please go ahead.

Jochen Gehrke – Deutsche Bank

Yes, good afternoon. Three questions if I may. First of all, Mr. Uebber, could you just give us a guidance for CapEx, what we should expect now for the second half? Are you going to spend as much as your initial guidance now indicates or should we go for a lower CapEx number than what you are originally envisioning [ph]. And then secondly, on your financial income, you are obviously showing a very strong increase in net liquidity, this is yet to show a strong positive impact on the financial results. Could you just share your thoughts there? I see the pension impact, but even net of that seems that you are more expensive from earlier last year, still painful, what’s your view on that? And then thirdly for Dr. Zetsche, obviously at the beginning of this year, you had a much more cautious year on the assessment of the current fiscal year and the delta where we are now just a couple of months thereafter to your assessment earlier in the year is very significant. I think it would be interesting to see what were the elements that surprised you so massively on the upside, as I understand that volume cannot be the only driver, was this mix, was this pricing or is this really the increase reliance on China? Thank you very much.

Bodo Uebber

Jochen, thank you for your questions. First, let me comment, you asked for CapEx, let me first tell you R&D, I do think our run rate there is in line, but we have already told you in the beginning of the year, with the two years’ assumptions where we roughly said 50-50 in 2011 and 2012 for your two years’ expectations, the run rate you have seen was total R&D expenditures which includes the capitalized R&D cost on the 1.2 billion level that should go further with the quarters as we will invest in what we have also that we have told about the content. In CapEx, we are little bit back loaded so to say for the second half. You have to keep in mind that we do, for example, we have now successfully the agreement on the Foton joint venture with NDRC one week ago. That of course will impact for example Q3 and Q4. So, we are in line with our guidance on the CapEx side what we have given also on February, but of course, we have decided to be as we said before as disciplined as possible, so there might be opportunities that become lower in as compared to the number which we have given you in the beginning of the year.

From a financial result point of view, of course, the pension expense we have in that basket, of course will stay at least for the next quarters, because it is already defined in the beginning of the year. For the pure interest results from net liquidity and cash point of view, we had some impact on derivatives, which of course are negative when the interest level is going down. This impact is included also in the second quarter. So, if we turn interest rates, of course, on the one hand, let’s make the assumption that it will be constant, we will have a positive impact, positive so to say means the interest expense will go down in the Q3 and Q4 number, and I have said it before, sometime in 2011, we might change to the position of a positive interest result, but that will be subject to a discussion for 2011.

Dieter Zetsche

To your third question, first of all, I think it’s very consistent between all economists that they are increasing their forecast for worldwide GDP development almost on a monthly basis. The same applies to a number of regions including Germany for instance. Secondly, the total market expectation has been increased by all participants, observers and participants on a consistent basis throughout the industry as well. And in consequence, we have increased our volume expectations significantly, not mainly driven by China, but by the combination of basically all markets. China is one element of that. The magnitude of sales volume increase is coming from China to the total increase, I would consider something in the magnitude of 20%, something like that, 20% to 30%. But volume as rightfully already stated is just one element, an important element of course. The other one is mix. We see a very positive development on mix. So, their highest increases are with S-Classes, with E-Classes, with SUVs and these are certainly the ones with the best sales contributions.

And at the same time, while those two indicators are developing very positively, we are and I think to quite some extent against market trends, able in realizing better price execution, reducing discount rates beyond our own objectives. And if you combine all three elements, you have the main reason for the significant improvements in profitability and in our forecast, one element goes along with it. As you all know, we have accomplished significant cost reductions last year. We all said that our objective is to maintain these new cost levels, now to maintain them while volume is rebounding significantly is perhaps even more than someone could have expected, and that is obviously then the missing part to the total picture which has such a positive development.

Jochen Gehrke – Deutsche Bank

Thank you.

Michael Muhlbayer

So, next question is Christina Church.

Christina Church – Barclays Capital

Hello, yes, this is Christina Church from Barclays Capital. I have of course a couple of questions. Firstly on pricing, I just want to get a bit of an update from you on your outlook. You obviously had very strong pricing in the first half of the year. Just wanted to see what you expect for the second half of the year? And then more specifically on pricing in China, I know there have been press reports recently about the pricing pressure much end of the market, I was just wondering whether you had any worries overseeing any signs of that spreading to the luxury end of the market or whether the pricing in China was still remaining extremely firm? And then, second question is on cash flow, I know you have talked about CapEx already, but I was just wondering, Q1 results, you did give some indication that you would have significantly positive cash flow for the full year as a whole, but the working capital would be negative, can you give any further update on that and what we should expect in the second half based on what we have seen obviously with very positive payables in the first half of the year? Would we expect some of that to pull back in the second half or should we still expect a very positive cash flow? Thank you.

Dieter Zetsche

As far as pricing is concerned, our objective is obviously to at least maintain the pricing levels we have accomplished. Meanwhile, mid-term our objective is to further reduce the discount levels. As I said before, this is not necessarily in line with the total market development. Among our peers, we see different behavior of more aggressive or less aggressive actions as far as pricing is concerned in the market. China, in some segments, we have seen by especially one competitor on the premium side, pretty aggressive pricing actions in the sense of lowering prices. That is not our objective and our strategy, we will not fight for the last unit we sold there, and on that basis, our objective and so our expectation is that we can maintain our price level in China as well. Once again, acknowledging some pressures in the marketplace as you rightfully mentioned.

Working capital, Bodo, certainly will add, I would just make one comment that given the structure between our supply side and our downstream side, an increase of our revenues tends to give us somewhat better relation between our supplier and our distributor credits situation and therefore we basically at working capital, we reduce our working capital based on growing revenues, but that’s only one effect, and our inventories of course is another important element. There again, when your – not again there, when your revenues are growing and you have the same days of supply, obviously you have an increased need for working capital, but altogether at least in the first half, we have managed that total balance very positively, and we see good chances to stay positive in this regard throughout the year as well.

Bodo Uebber

So, Dieter explained many things of the equation. So, I don’t want to give you half year cash flow guidance. We told you in the first quarter that we will be significantly positive with the free cash flow industrial in the three-digit numbers, I do think we have to raise the bar right now. We are at 2.8 billion roughly now for the half year, and Dieter has said, okay there are some elements in where we have for example accounts payable financing our gross, and of course, but we have to keep in mind looking further in Q3 and Q4, we have also to keep in mind that we have to provide for some gross in the first quarter of 2011 with our inventories, for example, for China, for the US, but of course also for maybe some model changes changeover that we will have in 2011. So, keeping that in mind, I expect a very good free cash flow industry better than we had expected. And as I said before, first quarter we said high three-digit number, I do think that could be at the end of the day a far higher number than this in the billion area, so far more than the 1 billion free cash flow.

Christina Church – Barclays Capital

Great, thank you very much.

Michael Muhlbayer

Next question, we will take from Arndt Ellinghorst, please.

Arndt Ellinghorst – Credit Suisse

Yes, thanks a lot and good afternoon. It’s Arndt Ellinghorst from Credit Suisse. I have bit more of a strategic first question. I think in all of our discussions with your investor base, it becomes very clear that your capital goods related businesses are really doing well. They deserve evaluations similar to Volvo and so on, you know all the arguments, and it seems that the car business is mistrusted to a large degree. People just don’t believe that there is better sustainability in the profit generation from Mercedes. I know you have stressed that this would change after you demerged with Chrysler, then we went into the crisis, things went very bad and everything. Now, where you stand now, what confidence do you have that your car business can really run on this 8% to 10% profitability window roughly, and that we are not getting major negative surprises in the future? Is that your cost base, is that the new regional setup really, but just give us some color if you may? And the second question just quickly, a bit more technical, please update us on your current net Dollar exposure and Pound exposure and to what degree you are hedged for this year and for next. Thanks a lot.

Dieter Zetsche

Thanks for the question. When I look at the last five years, I think in 2005, we were in a difficult situation with the Mercedes Car business, low profitability, significant costs on the quality side, and a number of other issues, smart and so on. We addressed all of them. We had a major program called as you know, which delivered significant results. We addressed the quality side to the extent that we are now basically leading in most markets in this regard, far ahead of our peers, far ahead of volume makers who claim to produce good quality. Same is true for reliability or appeal, all these third-party indicators you can see. In the past, we never were famous for customer satisfaction. We have started a major program in this regard called CSI Number 1. Meanwhile, basically in all markets, we have on the sales side and the service side leading positions as far as customer satisfaction is concerned for the first time in the 125 years period of this company.

We significantly as I said before have improved our cost bases and we are in most areas at benchmark levels compared to our peers, and those are basics of the business, which I don’t see any area where we would be disadvantaged against our main competitors to the opposite the most we are in a leading position. Now comes the most important part which is product and brand. Especially on the brand especially in Germany mainly and a little bit beyond, have shown some horizontal movement for some period of time. This has changed dramatically. In areas like China or the US where always where by far the strongest brand anyway, but we are coming back big time in Germany and other countries here in Europe as well based on great products, based on a consistent and more and more emotional styling, and based on a very competitive CO2 situation different from the past. So, basically all of their main parameters of the business are going to the right direction, in many cases benchmark, and as far as our profit track record is concerned, we had a consistent development except for the crisis, which as costs two or three quarters where we showed a miserable performance. That is true. I don’t think it was initiated internally, but perhaps we could have shown less impact from what was happening externally. But other than these three quarters, I think we are clearly delivering on what we said at the beginning, we wanted to go for 10%, we now said we will be there latest by the second half of 2012. Second quarter this year, we are obviously very close to this level, and I have no doubt whatsoever that with this brand, with this product lineup, with this operational system, we are the best-in-class, and we will consistently deliver on these levels as long as the environment is somewhat allowing that kind of a performance and not in major crisis mode.

Arndt Ellinghorst – Credit Suisse

And if I may just, additional question here, in China, you indicated that next year on profitability, just on margin perspective, Mercedes might experience a slight dip or a stable margin at the level we have seen this year. Would that still be your assessment where you stand right now?

Dieter Zetsche

We said in China, I thought you were referring to China. You were referring to the meeting we had in China.

Arndt Ellinghorst – Credit Suisse

Yes.

Dieter Zetsche

Yes, we said that next year, we have a number of significant product renewals, which will have some impact. Of course, our objective is consistency and continuity in our profit development, and so, of course, we have now a new yardstick to measure 2011, which is 2010. And that’s where we will try to develop from.

Arndt Ellinghorst – Credit Suisse

Okay. Do you think there was a – second question, addressing to the currency exposure and 2010 and 2011 hedge position.

Bodo Uebber

We have an exposure of, in the US dollar, 30 billion roughly now in 2010 of course, as we have more and more sales volume in the US, more sales volume in China, which we are adding up. You know this, others might not do it, but we are doing it because with respect to the US dollar, of course the exposure is growing, but on the other hand, we are doing good profit in these two countries. We are from a hedging point of view with 90% in 2010, which is roughly hedged so to say. Of course with the first half year is 100%, we are in 2011 with 60% in the US, use the opportunity when the dollar (inaudible) to do some further hedging which as we said always we do a combination of scoreboards, collars and options which was a good decision in 2009, because we got impact on the lower, on 1.22 to 1.23 area from the US dollar. In 2011, we are roughly with 60%. And for the Pound, we are at more or less same ratio. So, it’s also 90% and 60% roughly.

Arndt Ellinghorst – Credit Suisse

And the next exposure, please, on the Pound?

Bodo Uebber

Just roughly 1.5 billion.

Arndt Ellinghorst – Credit Suisse

All right. Thanks a lot.

Michael Muhlbayer

So, next question, we take from John Buckland.

John Buckland – MF Global Securities

Good afternoon. Thank you. When you talk about China, and you are dependent, you say you are not putting all your eggs on the basket, but I think there is a big question about what is the level of profitability, how close to 1 billion Euros have you made there this or you expect to make there this year? On the cash flow, I think that this cash flow includes the changes in other operating assets and liabilities, which seem to have a big change in the second quarter. It was minus 10 in the first quarter, plus 901 in the second quarter industrial business, I mean, just wonder what’s going on there, and whether that’s included in your guidance and whether that’s going to be a big positive effect on these non-operating cash flow benefits? And then, when you talk – it’s easy to understand when you are looking about sustainability of margin from 2012 onwards, how far down between now and the end of 2012 within to say these margins go, I mean, Arndt asked, you said in that corridor of 8% to 10%, I mean will it stay within that corridor or could it be going down below 8% in the coming quarters?

Dieter Zetsche

Starting with your last question, certainly you have a seasonality between the quarters where for instance the last quarter typically was affected by some one-time spending, and you have these kind of effects. As I said before, of course, our objective is to have as much continuity on the return on sales side as possible. We have committed ourselves to the 10% starting end of 2012. The earlier we can get there and the more stable we can come close to that point, of course, that’s the direction we try to accomplish. We have so many external parameters taken for exchange rates. That is very difficult to say now, or it’s impossible that we would be anytime below 8%. Certainly, our running rate performance at this point of time is 8 plus and under normal conditions, I would not expect fluctuations beyond that low end of the corridor.

Bodo Uebber

John, to your question on the cash flow, of course these are related to development of provisions, provisions as we have of course in some areas like warranty and goodwill for example, but also provisions related to, for example, overtime for example, it then fluctuates through the quarter. Therefore of course, it has an EBIT impact at the end of the day, and when you move over from the EBIT to the cash flow, you are eliminating of course the impact on non-cash provisioning, and this non-cash provisioning, you come to the cash flow. So, within the cash flow, you could say there is no impact of course from the provisioning at the end of the day. It’s clear that’s the effects of cash development, the cash flow as such from my point of view was a very strong one in the second quarter due to the fact that we had of course a strong EBIT on the one hand, and eliminating these impacts here from the provisions of even a little bit stronger than the EBIT development, then we are adding CapEx and other stuff and working capital in the second quarter was better than we expected due to better inventory development and that comes up with a, I would say very strong cash flow in the second quarter.

John Buckland – MF Global Securities

Just going on that point, are you saying that, that 900 million of positive in industrial business cash flow is somewhere in the P&L, there is an extra 900 million of costs, which weren’t there in the first quarter, because that figure was minus 10 in the first quarter?

Bodo Uebber

Not all of that, some as I said before, are just accruing for some quarterly development. As I said before, for example, much more overtime what we had where we have to accrue for this kind of cost.

John Buckland – MF Global Securities

All right, all right.

Bodo Uebber

So, from this point of view also, as I said, the pure number, the performance, let’s say is somewhat better than the numbers in the cash flow for example, compared to the EBIT.

John Buckland – MF Global Securities

All right, and will you tell us something about China? And also I wondered when you talk about one competitor in China, say he actually introduced prices, is that a company that’s been there a long time and perhaps hasn’t got the same real premium status in that market, perhaps he has another market?

Dieter Zetsche

Certainly, I do not want to comment on competitors in the first place, and to be much more specific, but directionally no for your assumption. China, we don’t give regional results, and we don’t want to start that, but in the past, obviously with lower volumes, we had already very strong profitability in China, better than many competitors with much higher volume numbers in this market. But of course, we have a very strong volume development and our profits go not necessarily proportionately, but they are much along with these volumes. So, it is an important market, but it’s not a market where as I said before all our eggs would be in one basket, we certainly could deal with reduction of the cost base in China as well.

John Buckland – MF Global Securities

I would say, so when you compound balance, you will feel as though your balance from a profit standpoint as well as a standpoint do you?

Dieter Zetsche

Very much so, even though we have huge growth rates in China, by today, the absolute volume still is considerably smaller than North America or Europe obviously. This might change overtime, but that is the current situation, and therefore we are definitely very balanced.

John Buckland – MF Global Securities

Okay.

Michael Muhlbayer

We take the next question from Daniel Schwarz.

Daniel Schwarz – Commerzbank

Yes, Daniel Schwarz, Commerzbank, thank you. Regarding again the mix position, Bodo Uebber mentioned that the free cash flow development is also much better than expected on your internal expectations, do you feel that your or do you think your balance sheet is already now significantly underleveraged, and what measures are you going to take in that regard? And the second question, the E-Class obviously still contributed significantly to the turnaround Mercedes margin, do you feel that competition increases here with the launch of the new 5 Series or remain incentives on a very low level?

Bodo Uebber

Daniel, first of all, I don’t want to discuss now the leverage of the company, I do think it’s far too earlier. We have a lot of volatilities in the markets. Yes, we have our basic scenario where we believed in, but on the other hand, we have to keep in mind that we are living in a huge volatility, and therefore I do think that does not makes sense to discuss about distributing anything in terms of liquidity to somebody. I do think right now we feel comfortable with our risk management and with our positions here, anything else we will address in the future.

Dieter Zetsche

The improvement of profit at Mercedes as I said before driven by many elements and as far as the product portfolio is concerned, yes, by the E-Class, but as much by the S-Class and the SUVs are major contributors and other vehicles are developing in the right direction as well. The S-Class, we have seen the launch of the 7-Series years ago. The S-Class is in its fifth year. Last quarter, we are reporting about now, we have sold more S-Classes than we have sold 7-Series. We have a positive development on the pricing side with the S-Class, and we are almost at levels of launch of this generation five years ago. Yes, there’s now the new 5-Series available, and that’s of course another strong competitor now for the E-Class, and as much as with the 7-Series, we certainly take that competitor serious. At the same time, we continue to see very strong sales in the E-Class. We continue to see an improvement of our pricing in that segment, and we have no reason to expect additional change significantly in the months to come, in this case, there are difference, in the renewal between the BMW and our line is only less than two years. So, just from their newness point of view, our relative position is even better than where the S-Class was for 7-Series. We take them serious, but we are not concerned that we could not continue the strong performance of E-Class.

Daniel Schwarz – Commerzbank

Okay, thank you.

Michael Muhlbayer

Next question is from Horst Schneider.

Horst Schneider – HSBC

Yes, good afternoon. Horst Schneider here from HSBC. I have got three questions if I may. The first one is in general the remark in your guidance, you say it’s all provided that automotive markets remain stable also in H2 2010. So, my question is in which markets you might see here the biggest risks in H2, is that Europe, US, or China, and with regard to China, I would be interested, what is the other order intake situation because I think the Chinese market will cool down somewhat in H2. Do you see already some signals in the order intakes that is also happening in the premium car segment? And then the second question is with regard to your guidance, when I remember to the China capital market, you have shown here a chart that shows that margin goes up in 2010 at Mercedes-Benz Cars then it goes slightly down ’11 or certainly remains stable. And then you go up from ’12 to ’13, and now we have got a situation that we are already in Q2, that your target margin in 2013. So, my question is, is now the long-term guidance that you provided for 2013, would you consider that as cautious or still as a fair realistic guidance? And the third question, just a simple one, maybe it’s not got that in your comments that you made to Arndt, are you now expecting also an H2 positive currency effect or was this just a one-off situation in Q2? Thank you.

Dieter Zetsche

Let me talk about China first. We see a continuation of the strong demand for product in China. We have independent of total market development a situation that we are right now in the launch mode of new E-Class being produced in China with an extended wheelbase. And that of course is a major incremental boost to our competitiveness in this market, because that’s the core of our business, and something where we were if you want, the two direct competitors. Now, we have the newest and best product in that segment as well. Therefore, we expect the second half to develop as strong as the first half. Even if the markets would reduce, it’s growth pattern a little bit, and we do not expect a major change in the overall climate in China going forward, even though any purchase index might change by digits one month or the other.

Horst Schneider – HSBC

Sorry. That means H2 sales in China will be higher than in H1?

Dieter Zetsche

I said I do not expect a reduction of our pace there. It might be that the growth dynamic is coming down a little bit, but on the other hand, as I said, our product offering is becoming stronger and both elements should be balanced. The guidance, we have given your indications a few weeks ago. We were talking about three-year perspectives. I don’t think it makes sense to discuss that on a monthly basis. And therefore, I would like to leave it with what we said in China at that point of time.

Bodo Uebber

Most of your questions of US, I don’t want to not to comment on third quarter last year to now expected third quarter 2010 in terms of exchange rates. Main message is right now, if we stay at the current levels, of course, we would not see, let’s say not a deterioration but also not a favorable development in Q3 – Q4 compared to the second quarter.

Horst Schneider – HSBC

Sorry. Again on my first question, in which market do you see now the biggest risk with regard to H2, or is there no risk?

Dieter Zetsche

Well, I mean, there is no risk in business in general. The third quarter seems to be pretty much safeguarded by now, and especially given the situation, the plans during the summer break, some of our plans, the defining factor now is the availability of products and not the markets for the third quarter. And from today’s perspective, very much the same applies for the fourth quarter. Once again, I don’t know if the sky will come down in September, but there are no indications whatsoever.

Horst Schneider – HSBC

Okay, thank you.

Michael Muhlbayer

Next in line is Max Warburton.

Max Warburton – Sanford Bernstein

Good afternoon everybody. Just two questions from my side. First one is again on currency. I am sorry to come back to this, but Mr. Uebber, you said the net dollar long is $13 billion at the present time. We have obviously seen something like a 15% currency move since the end of last year. So, simplistically, there should be something like a $2 billion operating profit impact at some point if this exchange rate lasts as your hedges roll off. Could you just help us understand, because you said in response I think to Horst’s question that there would not be either really a positive or negative currency impact in Q3, I think you said Q4 as well. When do we see the positive currency effect? If this exchange rate holds, will we see very significant currency effects in 2011? That’s the first question. And then just secondly, turning to trucks, I don’t know if Mr. Renschler could help us with this, the 1 billion profit guidance for 2011, could you just give us a feel of what’s happening by region. Are the US operations going to be in profit this year, is Asia still in loss, what’s the big moving part for this year in trucks, please? Thanks.

Dieter Zetsche

Let me perhaps just at the base clarify that. At the end of 2009, we have not seen the impact of the very weak dollar to its full extent because we have been hedged, and therefore of course, the benefit if you want of a better currency doesn’t come through to the full extent either. That is the nature of hedging and therefore I think the statement as Bodo made before were clearly founded.

Bodo Uebber

Thank you for the consolation. Again, we were at a good position that we were, let’s say, that we based our total hedging policies on collars adopted. So, therefore of course we could benefit now from the development of the US dollar so to say, and locked in this positive development. In a different dollar rate, of course, it would have been a different method of course, but there of course, we use this opportunity. The same goes to then for 2011, we have partially followed adoption and somewhat hedged in rates. So, at the end of the day, the most important question is where does the dollar get to in 2011. We have a 40% open exposure, but if you would see 1.20, it would be perfect. If we would see 1.50, it would have been a challenge on top of a future day. So, the most important question is where would be the dollar in 2011 and 2012 and that obviously you cannot answer today many, many questions to that. We do expect as we have always said, let’s say a balanced Dollar/Euro, more towards purchasing power of parity rates, but at the end, we have to keep in mind that the dollar in 2011, it could be on a different level positive and as negatively said, and therefore I can answer your question next year when we see the spot rates where they are developing.

Dieter Zetsche

You could say that for about 60% of our exposure next year, we can expect somewhat similar effective rates for our business as we are seeing this year. That’s based on our action.

Bodo Uebber

Due to the fact that we have collars and auctions which are moving with us, so therefore the statement is also true. It would be more or less on the same level.

Max Warburton – Sanford Bernstein

Okay, thank you. From my side, that’s much clearer than in the past. Thanks for clarifying it.

Andreas Renschler

Okay. Max, I think for your question regarding trucks, as you know, we are in second year of our restructuring programs as well as in US and in Japan. Both programs are running very good, that means ahead of our internal plan. And I can reconfirm what I have already said, we will be positive in United States and in Japan at year-end.

Max Warburton – Sanford Bernstein

Okay, thank you very much.

Michael Muhlbayer

Next in line is Thierry Huon, please.

Thierry Huon – Exane BNP Paribas

Yes, good afternoon. My question have been already addressed. Just a clarification about the dollar exposure, Bodo Uebber said that the net exposure at $13 billion that I didn’t hear if it’s with or without China exposure. So, could you clarify this?

Dieter Zetsche

Always with China in our case. Some competitors are doing this for having a total exposure.

Thierry Huon – Exane BNP Paribas

$13 billion includes?

Bodo Uebber

Including China and including Middle East exposure. So, oil factories where we denominate already in US dollar.

Thierry Huon – Exane BNP Paribas

Okay. And then another question still about currencies, being the consolation effects you could hedge, don’t you believe that the current pricing level in the US and in China is helped by the current strong dollar that might become a bit weaker if the dollar is moving or concerning is current weakness?

Dieter Zetsche

We have seen basically no pricing occurring through in the change of exchange rate from 1.50 to 1.20. So, on that basis, I cannot conclude that this kind of short-term correlation that exists.

Thierry Huon – Exane BNP Paribas

Okay. Thank you.

Michael Muhlbayer

Next in line is Philippe Houchoi.

Philippe Houchoi – UBS

Yes, good afternoon. I guess I want to ask a question on dividends since you don’t want to answer at this stage, I understand. The second question I had was about Renault, I think it was about three months since you signed a partnership with Renault on sharing a number of components and engineering etcetera. Could you give us an update on how things appreciating have they moved along, how are they going ahead, and how it managed internally to make sure that it’s focused and engineers don’t continue what they want on each side without necessarily cooperating?

Dieter Zetsche

Thank you for the question. We have defined various specific areas of corporations when we entered into this corporation. We have established a very rigid organization in order to watch and drive these common projects. This is working. So, on a top level, we are meeting on a monthly basis to discuss the progress, to discuss areas where we need more focus or more support or being more demanding in order to continue according to our plans to succeed according to our plans. Overall, and you know the areas, the engines, there are small platforms and so on. The van side, we see progress as we planned for and as we expect it would happen. So, so far, everything is on track.

Philippe Houchoi – UBS

Thank you very much.

Michael Muhlbayer

Next question we take from Jose Asumendi.

Jose Asumendi – RBS

Hi, Jose Asumendi from RBS. Couple of questions please. On Actros, there was a sharp increase on the wholesale in the second quarter. Could you just elaborate specifically in Germany the main drivers behind that and if you could just comment on the fleet sales momentum? And on trucks, could you please just confirm that the European – in Europe, you have managed to breakeven at the moment in the second quarter, and in relation to your North American trucks and pricing, we have seen some competitors having difficulties trying to reduce the new engines, the new technology and especially passing on the higher prices on to the market. Are you currently, how you started already – going to reduce this new technology and are you having some difficulties to pass on these higher prices?

Dieter Zetsche

I understood your question. You were concerned about the wholesale development in Germany. First of all, wholesale and retail in Germany is based on the structure we are having there. Secondly, the total market development was pretty negative for the industry, which I think in the range of 30% decline. We had a decline of about 7%, which obviously gave a significant market share gains. So, we are running at a month-to-month difference slightly above or slightly below 10% market share, which is pretty significant for premium brand. We are ahead of our direct peers in our sales in Germany. So, we do believe we have in a more difficult markets, Germany, a very good performance. That is of course partially due to the scrapping fee and the impact which this had on the volume side and not so much on our side. Therefore we didn’t see so much rise last year and therefore not so much decline. So, that is part of this story.

Bodo Uebber

To your two questions, the first one if you are positive in Europe, very simple, yes. The second part of your question was more or less pricing in United States. Indeed we introduced EPA 2010 variants of our trucks based on SCR technology beginning of this year. So far, we received in excess of $23,000 for our EPA 2010 units. The market is – the feedback of the market for the engine is very good. We have achieved a very good fuel assumption, up to 5% to 7% advantage. So far, we were able to put our price upcharge, so it goes up to $9,000 to the market and we try to make no compromise.

Jose Asumendi – RBS

Great. Thank you very much.

Michael Muhlbayer

Next in line is Christoph Rauwald.

Christoph Rauwald – Dow Jones Frankfurt

Good afternoon, Christoph Rauwald from Dow Jones Frankfurt. One quick question on the prospect of Smart, please, following up on yesterday’s announcement about the organizational changes. Which concrete steps are you planning in coming months to stabilize sales ahead of the launch of joint models with Renault in 2013 onwards? Will Smart be profitable this year and next and if not in what magnitude roughly will the losses be until the cooperation with Renault starts? Thank you.

Dieter Zetsche

Thank you for your question. To the first half of your question, you mentioned one decision and action we took with introduction of product area, Smart. The objective is to put more emphasis and focus on the brand of Smart and the business system again. On the other hand, this is not a business unit, and therefore we have no reporting on the specific results of Mercedes. Smart is contributing to the overall profitability of Mercedes that we have no accounting for Smart. The second element which we have taken and which is the course of normal business if you want is the facelift which we have just presenting right now with pretty good reaction so far. So, we are kind of mid-cycle in this current generation of Smart, and we do believe that Smart will become much more attractive again in the market to the customers with this facelift. We have one effect which we cannot mitigate, which is the US market development altogether. On the one hand, we had a lot of hype around Smart with the early introduction in the US. On the other hand, the segment altogether of sub compact cars, mini cars in the US showed declines of 70%, 80%, which of course protects us very much as well as all competitors. So we have to assume that for the time being, the volume increment from the US will be relatively limited compared to one or two years ago, and that is the main reason why our numbers compare unfavorably to last year and the quarter.

Christoph Rauwald – Dow Jones Frankfurt

Thank you.

Michael Muhlbayer

So next in line is Christian Breitsprecher.

Christian Breitsprecher – Macquarie

Good afternoon. It’s Christian Breitsprecher from Macquarie. I have a question coming back to the sustainability of your cost savings, and when we look at the quarter, year-over-year walk down in the first quarter, when you had cost savings of about 700 million helping you, and in the second quarter, other cost changes were actually negative 17 million. Now we have your short time work gone and your temporary wage cuts gone; do we have to expect more negative year-over-year numbers in terms of other cost changes or what do you expect?

Bodo Uebber

Christian, of course, good observation, first of all. For the development, currently I would say we are pretty happy with what happens in the company in terms of cost discipline and investment discipline. So that works quite fine in the first two quarters. We had some cost increases, of course, but that is naturally the case when you have increasing revenues and sales, you come to expect more logistics off, which is okay, because we are covered by sales for the same, also comes from the customs, for example. We will see, of course, some increase in our cost base due to the wage cuts we had, which is not anymore the case, since the end of May, more or less, for the employees; for the Board, of course, one month later; and that will lead to some cost increases as we have always commented in the second half of the year. We have said it would be roughly for the half year, 300 million; so per quarter, maybe 150 million, which we have to work on, and therefore, of course, as we said, you need to offset this kind of development with further measures on our excellence, which we have across all our business units. Therefore, so the cost development in the second quarter is in line with our statement that we like to make this, but we have worked on last year sustainable for the future.

Dieter Zetsche

And we have said that we deliberately decided to increase some marketing spending on the costs side on purpose. On the other entrance is the area where Bodo's activities are part of the whole G&A headquarter area in a very wide sense, we maintain the 20% reduced cost level of last year exactly so far throughout 2010, which I think is a major accomplishment. So, as Bodo said, we are very, very happy that efficiency indicators all show that we continue where we left at last year.

Michael Muhlbayer

Okay, next is Philippe Barrier.

Philippe Barrier – Societe Generale

Yes, good afternoon. I have three questions. First one, just regarding the market share of Mercedes in Europe. Looking at (inaudible) at the end June, the market share is slightly down, and volume are in line with the market. So just a question regarding the market share due to geographic mix or due to allocation of products between continents, but just a big surprise are the decline in the market share of Mercedes in Europe in the first six months. Second question is regarding the guidance you make on the reconciliation. The (inaudible) which has not been modified in 2010 and you still expect 20 million Euros negative on that topic and just can you explain why this item has not changed as we go to 81 million Euros profit in the first half? And the last question is regarding to the impact of raw materials. Do you think that you should bear some increase in raw materials cost in the second half due to some new contracts signed on the steel and other products?

Dieter Zetsche

Your observation on market share is correct. In the first half of this year, we have basically all the time sold at max available capacity. That of course does not exclude that we could have decided half a year earlier to add shifts or stuff like that, which of course, we had no base to do on that timing, but based on the basic structure of our production, we used all capacity available throughout the first six months. The constraints we had were specifically affecting Europe, and therefore, your observation is right. At the same time, of course as well, if you are short on products, we look at contributions as well, and there were some nice opportunities which we tried to leverage from. So I have no concern whatsoever about our competitiveness in Europe going forward.

Bodo Ueller

Okay, coming up to your other questions, the 200 million of course is our estimate for the reconciliation items for the total year. We have of course the elimination there between the units, and then it is something of course if you are in the second half in that amount that become roughly to the minus 200. Of course, it could, at the end, lead to money for the lady, but then directionally is the case, we also have the impacts on some participations here, like we have yet another, which we are handling in the other area. So the best estimation we can give you here in that area is the 200 million. Raw material-wise, I think in 2010 the impact will be a minor one or one we can handle. So even that we have to renew some contracts in the second half, but we always said the impact in 2010 is something we can offset with the efforts we are doing on the material area on the technical side on the one hand, but the commercial side also on the other hand. So, there is roughly no impact, but it is not too huge.

Philippe Barrier – Societe Generale

Okay, so we have seen that there is some impact to expect in the year 2011.

Bodo Ueller

Of course, in 2011, we have to see on what contract-base we are closing these kind of contracts. But currently, I do think the last 4 to 6 weeks, we have had a little bit of reduction in this area, whatever will be then on when we will discuss the contracts.

Philippe Barrier – Societe Generale

Okay, thanks.

Michael Muhlbayer

Okay, next in line is Stephanie Renegar.

Stephanie Renegar – JP Morgan

Hi, Stephanie Renegar from JP Morgan. I guess you guys didn't want to comment that much on dividends or share repurchases, but just looking at your credit rating, I guess you are still on negative outlook at those agencies which was put in place quite a while ago. Just wondering, first of all, have you had any recent meetings with the agencies to discuss your going forward outlook and whether or not it should be taken off or even raised, given your free cash flow generation, and also if this is one of the factors that you are taking into account when you are thinking about returning values to shareholders. And that is it from me.

Dieter Zetsche

Stephanie, of course yes, we had discussions with the rating agencies, regular ones, so not extraordinary ones, regular ones which we do during one week and you have seen the impact of course on pictures already change from negative outlook to positive. So therefore, the development is good. I don't want to comment now on what I expect for the other rating agencies, when and what they will act. I do think the performance of the company as regarding the indicators, which are important for the ratings are clearly heading into the right directions from our point of view. From the company point of view, you can already see the impact on the spec side, where we are developing further in the right direction I would say, and therefore, we have to wait and see until we can find the results from the rating agencies. That is it. The last call I think we referred to anything of cash and liquidity and share buybacks, I said, okay, it is not the time to talk about it.

Stephanie Renegar – JP Morgan

Okay, all right. Thank you very much.

Michael Muhlbayer

Okay, next in line is Ranjit Unnithan.

Ranjit Unnithan – JPMorgan

Hi, thanks for taking my question. A couple of questions. First, on your cost base, can you quantify the expected increase in cost base that you expect, particularly the Mercedes division, second half versus first half. I think you have already quantified part of this, as you said, you know, the wage reduction will add about 300 million at a (inaudible) level. But could you also help quantify I think other headwinds that you have talked about earlier which are CO2-related costs, R&D. That is one question.

The second question is on trucks. Am I to understand that your truck EBIT guidance of 1 billion, that is based on your revised outlook for the end markets in North America, 10%, 15%; Europe 5% to 10%. The North American outlook, in particular, looks relatively light versus at least the orders that you have at the end of the second quarter. I would have thought you could be up as much as 25%. But I just want to understand if your guidance for 1 billion, is that based on North America, up 10% to 15% range. Those are my two questions.

Dieter Zetsche

So sorry to say this, but we don't quantify, not in detail, CO2 costs, R&D and the others, I think we have made some comments on our wage cuts, and I think that is it. And due to competitive reasons, we don't want to give further details. Thank you.

Ranjit Unnithan – JPMorgan

Okay.

Bodo Uebber

About market development in the US, indeed there a chance to be 10% to 15% and forecast we have for the guidance, like you call the (inaudible) is based on this forecast. Of course there is a change but we don't see the change now. Maybe it is getting in the first quarter a little bit more and then in 2011. But basically, to answer your question again, yes, it is based on this forecast.

Ranjit Unnithan – JPMorgan

Okay, thanks.

Michael Muhlbayer

Next question we take from (inaudible).

Unidentified Analyst

Hi. (inaudible) I have one question considering employment, because in your press sheet, you wrote that you expect a favorable increase in employment worldwide, and do you expect this for Germany also? Thanks.

Dieter Zetsche

Yes.

Unidentified Analyst

That was the answer, yes?

Dieter Zetsche

Yes. I mean, we cannot quantify that, but the general statement applies around the globe, including Germany.

Unidentified Analyst

Okay, so you can't quantify just a bit, or –?

Dieter Zetsche

No, I don't think so at that point of time.

Unidentified Analyst

Okay, thanks.

Dieter Zetsche

Thank you.

Michael Muhlbayer

And we have one question from Christian Hessner.

Christian Hessner – Reuters

Right. My question was on the (inaudible), but that was already asked, so thank you very much.

Michael Muhlbayer

Okay, then we have Jürgen Pieper.

Jürgen Pieper – B. Metzler seel. Sohn & Co. KGaA

Yes, good afternoon, thanks for taking the question. Just one left. This concerns – this is on Daimler and BMW, where we had this one article on Monday that there might be a new quality in your talks after some kind of, I don't know how you name it, stagnation or so, for some time. It sounded like there were now a second stage of deeper talks. And if this is not true and maybe this is just due to a vacation writing of some reporters, but also there were figures mentioned and the – even it remains on the stage of single projects, the numbers given, some 50 projects were given where you could save more than 100 million versus one single project. This could head up to enormous amounts of savings of nearly about 1 billion or so. Would you confirm that more or less in the sense of this to this article was right and the quality is getting in any case is getting better or at least remains on a relatively good level.

Dieter Zetsche

I would say the only thing which is changing and is volatile is the media reports on our corporation. It was never as bad as it was described at phases, and it was never breaking all expectations on the other end. As we have said consistently, we are in operations in a continuous fashion and execution of opportunities we have together and we add one component or module to the other and this is very beneficial to both sides, has been, is, and will be, and a single project which you can single out or name them or not, but certainly when you talk about, I don't know if this number is correct, 50 areas altogether, I don't think it is that many, but anyways, and then you take one single project and attach a number to this one, it could not multiply two numbers with each other, that would certainly be exaggerated and the fact that BMW has named one of these projects being ceased, I guess they have not picked the least important one by talking about it. Anyway, I am satisfied with the progress in this regard. I was, I am, and I will be. And the only thing again which is changing is the reporting on that subject.

Jürgen Pieper – B. Metzler seel. Sohn & Co. KGaA

Okay, thanks.

Michael Muhlbayer

So we have one more name on my list. It is Adam Hull.

Adam Hull – WestLB

Good afternoon. Three, but brief questions. First, China, could you just tell us what the key to your revenue is, what about your export costs and you have got some parts and license payments in the JV. And then secondly, just on the FX, just 76 million benefit in EBIT in Q2. Now I would have thought that the Chinese benefit from the stronger Renminbi should have been significantly more than that. Now is that because you are hedging the dollar in some form, or is it because you are having to give some of that in local pricing. And then finally just on the CapEx, 1.3 billion is what you did in H1, 3% of revenues. Just tell us exactly, you have given some numbers, but could you give us what you are thinking about the full year and should we be thinking towards 4 billion as a full year number for 2011? Thanks.

Bodo Ueller

Adam, the first question, of course, we don't disclose these kind of details, sorry for that. For the next question, we have already commented that we had a pound impact, and the pound impact was an effect which we had in 2009, because we had an over-hedged position. And we sold it in the markets with good rates and had a good guidance in 2009. Excluding this pound effect, of course, the number which we have disclosed is 67, would have been substantially higher. The CapEx was already answered in one of the first questions. As we said before, we would like to – as we said in the early beginning of February, what we expect for the two years period, 2011 and 2012, we also addressed the subject that with high discipline, that we can lower down this number. The second half might be higher than the first half in 2010, due to the fact that we have to do some regional investments, especially in trucks, with regard, for example, with Proton, our joint venture.

Adam Hull – WestLB

Could you just follow up on the FX exposure, I mean the 13 billion you have given us. I mean, maybe you can give just this some idea as to what proportion is Chinese on India. Just confirm that you are.

Bodo Ueller

I have sometimes said, of course, I have said that it is roughly 25% made on the divisional day. It is roughly 50% from the US and 35% from China.

Adam Hull – WestLB

Okay, and then on the CapEx, I mean it is still 3.5 billion, towards 4 billion for 2011 and 2012. I mean, that was the averaging out. That is still broadly in place.

Bodo Ueller

We worked on this number to bring it down.

Adam Hull – WestLB

Okay. Thanks very much.

Bodo Ueller

Thank you.

Dieter Zetsche

Okay, ladies and gentlemen, thank you very much for your questions, for being with us today. Corporate communications and investor relations remain at your disposal to answer any further questions you may have. We hope to talk to you again soon. Thank you, and goodbye.

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