April 28th, 2005 – 1st Quarter Interim Report 2005

Management Report

Slightly weaker global demand for automobiles

The world economy continued to expand in the first quarter of 2005, despite ongoing high raw-material prices. The rate of expansion decreased markedly, however. One positive aspect was that economic growth in the United States and China slowed less than had been expected. On the other hand, however, growth prospects for Germany and Japan have become less encouraging since the beginning of the year.

The global demand f or automobiles weakened slightly in the first quarter of this year, although developments still differed from region to region. Whereas new registrations of passenger cars decreased slightly in the United States, Western Europe and Japan, significant growth rates were recorded for most of the emerging markets. For commercial vehicles, last year’s worldwide upward trend continued in a slightly w eaker form.

Revenues of €31.7 billion in the first quarter

In the first quarter of this year, DaimlerChrysler sold 1.1 million vehicles worldwide (+1%).

Unit sales by the Mercedes Car Group of 247,000 vehicles were 7% below the level of the prior-year period. Shipments at Chrysler Group decreased by 3% to 666,700 passenger cars and light trucks. Retail sales, however, increased by 5% to 664,500 vehicles. The Commercial Vehicles Division achieved a strong increase in unit sales t o 179,400 trucks, vans and buses (+43%).

Primarily due to the appreciation of the euro against the US dollar, DaimlerChrysler’s total first-quarter revenues decreased by 2% to €31.7 billion.

Group first-quarter operating profit impacted by expenses for realignment of smart

DaimlerChrysler recorded an operating profit of €628 million in the first quarter of 2005, compared with €1,546 million in Q1 2004.

The decrease in operating profit was primarily caused by expenses of €800 million related to the realignment of the business model of smart. Without this exceptional impact, Group operating profit in the first quarter would have been €1,428 million. Compared with the first quarter of 2004, operating profit was additionally impacted by the weaker US dollar and higher material prices. The Mercedes Car Group was particularly affected by exchange-rate effects arising from the operative business. For the Chrysler Group, Commercial Vehicles and Financial Services divisions, the main effect of exchange-rate movements arose from the translation of operating results into euros. Furthermore, the operating result of the Mercedes Car Group was significantly burdened by lower unit sales. The Chrysler Group did not quite equal its result of the prior-year quarter.

The Commercial Vehicles Division posted a significantly higher operating profit, due in particular to positive developments in the truck business. In addition, the settlement reached with Mitsubishi Motors Corporation (MMC) in the first quarter of 2005 on compensation for expenses incurred in connection with quality actions and recall campaigns at Mitsubishi Fuso Truck and Bus Corporation (MFTBC) resulted in income of €276 million. The Financial Services division made a higher contribution to Group operating profit because of lower charges from Toll Collect. The improved operating profit contributed by Other Activities was primarily a result of the improved earnings of the DaimlerChrysler Off-Highway business unit and an increased contribution to earnings from EADS.

The Mercedes Car Group reported a first-quarter operating loss of €954 million, compared with an operating profit of €639 million in the prior-year period. The result for the first quarter of 2005 was affected by expenses relating to the realignment of the smart business unit of €800 million.

At Mercedes-Benz Passenger Cars, operating profit decreased due to lower unit sales, mainly caused by lifecycle reasons, a less favorable model mix, and the ongoing strength of the euro. Expenses for the continuation of the quality offensive also contributed to the decrease. Operating profit in the first quarter was additionally impacted by increased prices for raw materials.

At smart there was an operating loss from ongoing business activities. In addition to this loss, there were expenses for the realignment of the business model. These expenses mainly comprised impairments on property, plant and equipment, additions to accruals relating to risks arising from contractual obligations, and the valuation of vehicle inventories. In the course of the year 2005, further estimated expenses of up to €0.4 billion may be incurred.

Chrysler Group posted an operating profit of €252 million in the first quarter of 2005 compared with an operating profit of €303 million in the first quarter of 2004.

The decrease in operating profit was primarily the result of lower factory unit sales and the appreciation of the euro against the US dollar. Worldwide factory unit sales of 666,700 vehicles in the first quarter of 2005 were 18,100 units lower than the prior-year period.

Operating profit in the first quarter of 2004 was negatively impacted by turnaround plan charges and charges for an incentivized retirement program for skilled trade employees totaling €75 million.

This increase in earnings was primarily a result of the worldwide market success of t he products of t he truck business and the settlement reached with MMC on the compensation relating to the quality measures and recall campaigns at MFTBC. The compensation from MMC led to income of €276 million.

The ongoing positive sales trend in nearly all business units and the successful continuation of the current programs to enhance efficiency more than offset negative effects which resulted from higher raw material prices and the ongoing strength of the euro.

The Services division was renamed Financial Services in the first quarter of 2005 to reflect its focus on the provision of automotive financial services.

In the first quarter of 2005, the Financial Services division improved its operating profit significantly compared with the prior-year quarter to €328 million (Q1 2004: €221 million).

The increase in earnings resulted from lower charges from Toll Collect (Q1 2004: €279 million). The expenses incurred by Toll Collect during 2005 are relat ed to the measures taken to ensure the successful start of the system and the planned expansion of the system functionality of on-board units.

Compared with the very high prior-year level, margins decreased in the leasing and sales financing business due to rising interest rates, especially in the United States. These effects were partially compensated for by an increased contract volume and lower risk costs.

The operating profit contributed by Other Activities amounted to €219 million in the first quarter of 2005, which was €85 million higher than in Q1 2004.

This increase was mainly caused by a substantial improvement in earnings by the DaimlerChrysler Off-Highway business unit. In addition, the proportionate contribution from EADS increased due to a strong operating result from higher Airbus deliveries.

Financial income for the first quarter improved to €80 million (Q1 2004: loss of €389 million). The improvement was the result of better income from investments, which rose by €343 million to €27 million, primarily due to the significantly reduced charge from Toll Collect. Income from investments in the prior-year quarter was also impacted by the negative contribution from the Group’s equity-method investment in MMC. Net interest expense was €42 million compared to an expense of €107 million in the prior-year quarter. Net other financial income increased by €61 million to €95 million, primarily due to higher income from the sale of securities.

Net income of €288 million was reported for the first quarter of 2005, compared with €412 million for the same period of last year. The reduction in operating profit was alleviated by the positive development of the tax situation resulting from tax-free income especially relating to the compensation for MFTBC. In addition, net income for the prior-year period was impacted by non tax-deductible expenses, mainly in connection with investments accounted for using the equity method, including MMC. The exceptional impact from smart reduced net income by €512 million.

Earnings per share amounted to €0.28, compared with €0.41 in Q1 2004.

Cash provided by operating activities decreased to €3.4 billion compared with the first quarter of last year (€4.0 billion) due to the earnings trend, although the special impact from the realignment of the smart business model has not yet had an effect on cash flow. There was a positive effect compared with the prior year from the decrease in net cash outflows for tax payments, resulting from a tax refund in the NAFTA region in the first quarter of 2005.

Cash used for investing activities decreased to €1.4 billion from €3.3 billion in the same period of last year. In addition to the net cash inflows from securities purchases and sales (Q1 2004: cash outflows), the reduction was also caused by increased revenues from the sale of receivables from financial services towards end customers. Opposing effects resulted from higher additions to equipment on operating leases, net, and property, plant and equipment.

Cash used for financing activities of €0.6 billion mainly reflects the (net) repayment of financial liabilities (Q1 2004: €2.5 billion).

Cash and cash equivalents with an original maturity of three months or less increased by €1.7 billion compared with December 31, 2004. Total liquidity, which also includes marketable securities with an original maturity of more t han three months, rose from €11.7 billion to €13.0 billion, related to the dividend distribution due in April.

Compared with December 31, 2004, total assets increased by €5.9 billion to €188.6 billion. €4.3 billion of the increase was attributable to currency translation effects.

Equipment on operating leases and receivables from financial services totaled €86.1 billion, equivalent to 46% of total assets. The increase in inventories was a result of the fluctuating production volumes during the year in the vehicles business in connection with model changeovers. The intensely competitive situation in the Group’s sales markets also had the effect of increasing vehicle inventories. Other assets decreased, mainly due to the valuation of derivatives.

On the liabilities side, minority interests decreased due to the Group’s increased equity interest in MFTBC. As of March 31, 2005, 15% of MFTBC’s stock was held by shareholders outside the Group (December 31, 2004: 35%). The increase in trade liabilities resulted primarily from the increase in production volumes compared with the fourth quarter of 2004.

Stockholders’ equity increased from €33.5 billion to €34.4 billion at March 31, 2005, due primarily to the positive net income, currency translation effects, and to a lesser extent the valuation of derivative financial instruments. Adjusted for the proposed dividend distribution for the 2004 financial year (€1.5 billion), the equity ratio as of March 31, 2005, remained unchanged from December 31, 2004, at 17.5%. The equity ratio for the Industrial Business was 24.7% (December 31, 2004: 25.3%).

At the end of the first quarter of 2005, DaimlerChrysler employed a total workforce of 386,789 people worldwide, which was 23,882 more than a year earlier (+7%). There were increases and decreases due to changes in the consolidated Group following the inclusion of MFTBC, the acquisition of dealerships and the sale of component plants by the Chrysler Group. The workforce also expanded for operational reasons due to new recruitment by the Commercial Vehicles Division in North America and Europe. Employment levels also increased in the Mercedes Car Group, particularly in the United States due to the expansion of our plant in Tuscaloosa. Adjusted for changes in the consolidated Group, the number of employees increased by 3%.

DaimlerChrysler assumes that the global economy will continue its present development in the coming months, thus expanding in line with its long-term growth trend. However, if raw-material prices, particularly for oil, remain at the current high levels for a longer period or rise even further, global economic development is expected to be negatively affected. Rising interest rates could also have a negative effect on consumer spending.

For the further course of the year, the growth of worldwide demand for automobiles is likely to be slower than in 2004. Whereas further expansion of truck markets is expected in the NAFTA region, there are indications of decreasing market expansion in Europe. In general, we expect the highly competitive situation across the entire automotive industry to continue, due to further reductions in product lifecycles and ongoing over-capacity.

DaimlerChrysler anticipates a slight increase in unit sales in full-year 2005 compared with 2004.

At the Mercedes Car Group, the launch of the M-, B-, R- and S-Class and the model update of the CLK are expected to result in a significant boost to unit sales, especially from mid 2005 onwards. We also expect positive effects from the new V6 and V8 gasoline and diesel engines, which are gradually being introduced in our model range. In total, we anticipate a slight increase in unit sales for the Mercedes Car Group.

The Chrysler Group anticipates a very intensive competitive situation for the rest of this year. Total industry sales of 17.2 million vehicles are expected for the US market. With the launch of additional new products, we intend to continue the positive development of the year 2004. Overall, the Chrysler Group expects to achieve higher unit sales in 2005.

For full-year 2005, the Commercial Vehicles Division expects its unit sales to continue the pleasing developments of 2004. There will be positive impetus in particular from the strong demand (evident since last year) for Freightliner’s heavy-duty trucks in the NAFTA region as well as for Mercedes-Benz trucks.

The Financial Services division looks forward to stable business developments and continued portfolio growth in the financial services business. At Toll Collect, preparations are progressing for the changeover from On-Board Unit 1 (OBU 1) to OBU 2.

EADS anticipates a continued upswing of the civil aircraft market in 2005. For the full year, EADS plans to deliver 350 to 360 Airbus aircraft (2004: 320 aircraft).

DaimlerChrysler Group continues to expect higher revenues in 2005 compared with 2004. The development of revenues depends to a great extent on changes in the exchange rate between the euro and the US dollar.

We also expect a slight increase in the size of the total workforce in 2005. In particular in the Commercial Vehicles Division and the Chrysler Group, employment levels should rise compared with the end of 2004.

The development of earnings during the further course of this year will be impacted by increases in raw-material prices, higher interest rates and the weakness of the US dollar against the euro.

After first-quarter operating profit was substantially impacted by exceptional charges from smart, we expect additional exceptional charges from smart also in the course of this year of up to €0.4 billion. Following a weaker first half, excluding the exceptional charges from smart, DaimlerChrysler expects a slight increase in operating profit for full-year 2005 compared with the prior year.

Forward-looking statements in this Interim Report:

This interim report contains forward-looking statements that reflect management’s current views with respect to future events. The words “anticipate,” “assume,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “project” and “should” and similar expressions identify forward-looking statements. Such statements are subject to risks and uncertainties, including, but not limited to: an economic downturn in Europe or North America; changes in currency exchange rates, interest rates and in raw-material prices; introduction of competing products; increased sales incentives; the successful implementation of the new business model for smart; and decline in resale prices of used v ehicles. If any of these or other risks and uncertainties occur (some of which are described under the heading “Risk Report” in DaimlerChrysler’s most recent Annual Report and under the heading “Risk Factors” in DaimlerChrysler’s most recent Annual Report on Form 20-F filed with the Securities and Exchange Commission), or 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. We do not intend or assume any obligation to update any forwardlooking statement, which speaks only as of the date on which it is made.