October 25, 2005 – DaimlerChrysler 3rd Quarter 2005 Interim Report

Management Report

Weaker economic growth and demand for automobiles worldwide

Global economic expansion slowed down once again in the third quarter of 2005; this also applies to the major economies of the United States and China. But in general, the world economy is still on a steady growth path. However, rising interest rates and above all the repeated sharp increase in the price of crude oil slowed growth rates worldwide. Domestic demand inWestern Europe remained weak. In Japan, however, there were further signs of economic recovery. Most of the emerging economies also posted pleasing growth rates.

Global demand for automobiles remained on a path of growth in the third quarter. However, growth rates were somewhat lower than in the first half of the year due to repeated sharp increases in fuel prices. Market volumes developed steadily in Western Europe, the United States and Japan. Demand increased in China after a temporary weaker phase while South America continued its positive sales trend. Worldwide demand for commercial vehicles was generally slightly higher than in the prioryear period. Unit sales and revenues up sharply in third quarter

Due primarily to the market success of new products from the Mercedes Car Group and the Chrysler Group and a significant increase in unit sales by the Commercial Vehicles Division, compared with the third quarter of last year DaimlerChrysler increased its worldwide unit sales by 9% to 1.2 million vehicles.

The development of unit sales at the Mercedes Car Group was very positive in the third quarter, with an increase of 6% to 310,900 vehicles. The Chrysler Group increased shipments by 12% to 663,400 passenger cars and light trucks, while retail sales also increased by 13% to 736,200 vehicles. The Commercial Vehicles Division raised its unit sales by a strong 9% to a total of 210,400 trucks, vans and buses.

As a result of the higher unit sales, DaimlerChrysler’s thirdquarter revenues increased by 9% to €38.2 billion.Headcount reductions at theMercedes Car Group in Germany.

At the end of September, the Board of Management set a staff-reduction target for the Mercedes Car Group of 8,500 jobs at locations in Germany.

The personnel adjustments are to be achieved over the next twelve months through voluntary severance agreements. They will help to significantly improve the competitiveness of Mercedes-Benz by increasing its productivity. The measures will also contribute to protecting the long-termfuture of production facilities in Germany. DaimlerChrysler will adhere to the agreement reached in 2004, “Securing the Future 2012”, which provides for voluntary solutions as the first step in any headcount reductions.

These severance agreements will result in charges of approximately €950 million, most of this expense is expected to be recorded in the fourth quarter of 2005.

Group operating profit significantly higher than in Q32004; confirmation of positive earnings trend at the Mercedes Car Group

DaimlerChrysler recorded an operating profit of €1,838 million in the third quarter of 2005, compared with €1,332 million in the same period of last year. All of the automotive divisions contributed to this positive development.

Higher prices for materials and crude oil than in the third quarter of 2004 had a negative effect on the operating profit of all automotive divisions. Earnings at the Mercedes Car Group and the Commercial Vehicles Division were additionally effected by less favorable hedging rates for the US dollar than in the same period of last year.

The Mercedes Car Group increased its operating profit in the third quarter, thus continuing its positive earnings trend. This was primarily due to the division’s efficiency-improving measures and higher unit sales. The Chrysler Group also increased its unit sales in a difficult market and achieved a higher operating profit than in the prior-year quarter. The operating profit posted by the Commercial Vehicles Division was significantly higher than in Q3 2004, whereby earnings were affected by exceptional factors in both periods. Despite higher levels of interest rates, especially in the United States, Financial Services’ earnings were at the same level as in the prior-year quarter due to lower risk costs. Other Activities’ operating profit was slightly lower than in the prior-year quarter, which had been boosted by extraordinary income.

The Mercedes Car Group posted an operating profit of €436 million for the third quarter (Q32004: €304 million), providing confirmation that the turning point was definitely achieved in the second quarter.

The better profitability was due in particular to the efficiencyimproving measures initiated within the framework of the CORE program. The positive effects on earnings from increased unit sales were partially offset by the unfavorable model mix due to the S-Class model changeover. Hedging rates for the US dollar were more favorable in Q32004 than in the past quarter. Following the positive decision by the European Court in a case concerning the infringement of EU competition law, a provision of €60 million formed in this context has now been released with a corresponding effect on the income statement.

The personnel-reduction measures announced at the end of September 2005 did not have an impact on the operating profit of the third quarter.

The Chrysler Group posted an operating profit in a difficult market environment of €310 million in the third quarter of 2005, compared with an operating profit of €217 million in the third quarter of 2004. The increase in operating profit resulted from increased shipments and lower restructuring charges, partially offset by a slight negative net pricing and financial support of €57 million provided to supplier Collins & Aikman.

Operating profit in the third quarter of 2004 was negatively impacted by restructuring charges totaling €104 million.

The Commercial Vehicles Division continued the positive trendof this year and increased its third-quarter operating profit  from €159 million to €498 million, including impairment losses of €63 million recognized in connection with the planned sale of all integral parts of our subsidiary American LaFrance. The result for Q32004 was impacted by expenses of €405 million related to the quality measures and recall campaigns at Mitsubishi Fuso Truck and Bus Corporation (MFTBC). An additional factor in the prior-year period was the discontinuance of the engine joint venture with Hyundai Motor which led to an exceptional gain of €60 million.

The primary reasons for the increased operating profit were the positive development of unit sales in all business units, and especially the international market success of the products of the truck segment. Efficiency improvements in the context of implementing the “Global Excellence” truck strategy also contributed to better earnings, more than compensating for charges from more expensive raw materials and worsened currency hedging for the US dollar.

The Financial Services division posted an operating profit of €408 million,compared with €412 million in the prior-year quarter. The stable earnings situation in the third quarter was primarily due to the ongoing positive development of risk costs partially offset by higher levels of interest rates, especially in the United States, and lower charges from the involvement in Toll Collect (€15 million; Q3 2004: €119 million).

Other Activities achieved a third-quarter operating profit of €242 million, compared with €258 million in 2004. The prior-year result included income of €120 million from the agreement reached with Bombardier to settle all disputes relating to the sale of DaimlerChrysler Rail Systems GmbH (Adtranz).

EADS made an increased contribution to the Group’s operating profit in the past quarter, due in part to higher deliveries of Airbus aircraft. The DaimlerChrysler Off-Highway business unit continued to make a positive contribution to net income.

Financial expense amounted to €9 million in the third quarter of this year (Q3 2004: €167 million). The change was due in particular to the decrease in income from equity investments by €94 million to €144 million; in the prior-year quarter there had been a positive effect of €252 million from the sale of the Group’s 10.5% interest in Hyundai Motor Company (HMC). However, the profit contributions from our investments in Toll Collect and EADS, which are accounted for using the equity method, improved significantly. Net interest expense and net other financial expense amounted to €120 million and €33 million, respectively (Q3 2004: net interest expense of €93 million and net other financial income of €22 million). The decrease in other financial income was mainly related to the valuation of derivative hedging instruments.

The Group posted third-quarter net income of €755 million (Q3 2004: €951 million). The increase in operating profit was partially offset by the higher income-tax expense and financial expense. The increase in the tax expense resulted from a changed composition of income before income taxes, which in the prioryear quarter included the tax-free income from the sale of our interest in HMC.The change in earnings allocated to minority interests was primarily due to the charges for quality actions and recall campaigns at MFTBC in the prior-year quarter.

Earnings per share amounted to €0.74, compared with €0.94 in the third quarter of 2004.

Cash provided by operating activities of €11.0 billion was higher than in the first nine months of 2004 (€10.5 billion). In addition to lower outflows for tax payments in Germany, the increase was primarily due to lower receivables from inventory-related receivables from financial services. Funds were released from these receivables due to decreased dealer financing because of dealers’ diminished stocks of vehicle. Opposing effects with a negative impact on cash provided by operating activities resulted from the higher volume of cash tied up by the increase in the Group’s own inventories and trade receivables, as well as from currencytranslation effects. Allocations to the pension funds were at the same level as in the prior year (€0.9 billion).

Cash used for investing activities decreased significantly to €9.0 billion from €13.1 billion in the same period of last year.

The reduction was primarily related to lower receivables from financial services provided to retail customers. In addition to higher proceeds from the sale of receivables, the volume of new financing contracts decreased while payments received increased. There were opposing effects increasing the cash used for investing activities caused by net additions to equipment on operating leases, net acquisitions of securities, and payments made for the acquisition of the remaining shares in MTU Friedrichshafen. An additional factor was the lower proceeds from the sale of businesses, which had been positively affected in the prior-year period by the sale of the Group’s interest in HMC. Capital expenditure for property, plant and equipment was in the magnitude of the prior year period.

Cash used for financing activities amounted to €3.6 billion. This was primarily the result of the (net) repayment of financial liabilities of €2.2 billion and the dividend distribution for the 2004 financial year of €1.5 billion. In the prior-year period, the dividend distribution was partially offset by a cash inflow from net borrowing. The exercise of stock options resulted in a cash inflow from the issuance of shares of €0.1 billion in the first nine months of 2005.

Cash and cash equivalents with an original maturity of three months or less decreased by €1.0 billion compared with December 31, 2004. Total liquidity, which also includes marketable securities with an original maturity of more than three months, decreased slightly from €11.7 billion to €11.6 billion.

Compared with December 31, 2004, total assets increased by €14.1 billion to €196.8 billion. €13.2 billion of the increase was attributable to the effects of currency translation.

Equipment on operating leases and receivables from financial services totaled €92.4 billion, equivalent to47% of total assets. The increase in inventories was a result of the fluctuating production volumes in the vehicle business during the year in connection with model changeovers. Other receivables decreased primarily due to the valuation of derivatives.

On the liabilities side, minority interests decreased mainly as a result of the Group’s increased equity interest in MFTBC. As of September 30, 2005, 15% of MFTBC's stock was held by shareholders outside the Group (December 31, 2004: 35%). Minority interests also decreased slightly following the Group’s acquisition of those shares in MTU Friedrichshafen that had previously been held by minority stockholders. The change in accrued liabilities was primarily caused by currency-translation effects.The increase in trade liabilities resulted mainly from the increase in production volumes compared with the fourth quarter of 2004.

Stockholders’ equity increased from €33.5 billion to €35.5 billion at September 30, 2005, due primarily to currency-translation effects, the positive net income and the valuation of available-for-sale securities. Opposing effects resulted from the distribution of the dividend for the 2004 financial year and the valuation of derivative financial instruments.

The Group’s equity ratio as of September 30,2005 was18.0% (December 31, 2004: 17.5%). The equity ratio for the industrial business was 25.2% (December 31, 2004: 25.3%).

At the end of the third quarter of 2005, DaimlerChrysler employed a workforce of 388,014 people worldwide (end of Q3 2004: 386,195). Of this total, 185,288 were employed in Germany and 98,945 in the United States (end of Q3 2004: 187,793 and 97,782 respectively).

The workforce expanded for operational reasons, due in particular to new recruitment by the Commercial Vehicles Division in North America and Europe.

DaimlerChrysler assumes that the world economy will continue to grow in the fourth quarter of this year, despite another slight slowdown.The emerging economies in particular should continue their strong expansion. For full-year 2005, DaimlerChrysler expects the world economy to grow by around 3% (2004: 4.0%). However, especially the high oil price poses a significant risk for investment and consumption.

We assume that dynamic growth in demand for passenger cars will continue in the emerging markets, while only slight growth is expected for the markets of North America, Western Europe and Japan. Global demand for commercial vehicles is expected to further increase in the fourth quarter. Prospects are still generally positive in the United States, while demand may weaken slightly inWestern Europe.We expect a slight increase in demand for commercial vehicles in Japan, and the emerging markets should continue their dynamic development. In view of further reductions in model lifecycles and ongoing over-capacity, we do not expect any alleviation of the intensely competitive pressure in the automobile industry.

DaimlerChrysler still expects a slight increase in unit sales for full-year 2005 compared with 2004.

The Mercedes Car Group is confident that the positive unitsales trend will continue in the fourth quarter.We anticipate stimulus from the M-Class and the B-Class, as well as from the new S-Class, which was launched in Europe in September. The division assumes that unit sales in the full year will be of the same magnitude as in 2004, while retail sales are expected to rise.

The Chrysler Group anticipates a continuation of the tough competition in the North American market during the fourth quarter. Due to the continued success of our attractive products,weexpect full-year unit sales to surpass last year’s figure.

The Commercial Vehicles Division assumes that unit sales will remain stable in the fourth quarter. Due in particular to the strong demand for trucks, we expect unit sales to increase substantially in full-year 2005.

The Financial Services division anticipates moderate growth in contract volume in 2005. At Toll Collect, the changeover from the software version of On-Board Unit 1 (OBU 1) to OBU 2 will continue in the fourth quarter.

EADS expects the recovery of the market for civil aircraft to continue in the fourth quarter. Incoming orders in the full year should significantly exceed the prior-year figure. EADS plans to deliver more than 360 Airbus aircraft in 2005 (2004: 320).

The DaimlerChrysler Group anticipates a significant increase in revenues in 2005. The Group’s workforce is expected to grow slightly compared with the end of 2004, although we assume that the headcount at the Mercedes Car Group will decrease slightly by the end of this year. The staff-reduction program at the Mercedes Car Group should lead to a further headcount reduction during the next twelve months. Year-end employment levels at the Commercial Vehicles Division should be higher than at the end of last year.

Earnings in full-year 2005 will be impacted above all by the less favorable dollar-euro exchange rate and hedging rates than in the prior year, as well as by increases in raw-material prices. An additional factor is that over the next twelve months,we expect to incur costs of €950 million in connection with workforce adjustments at the Mercedes Car Group. Most of this expense is expected to be recorded in the fourth quarter of 2005.

DaimlerChrysler assumes that the expenditure for headcount reductions will be offset by income from special items and improvements in the ongoing business. Therefore our earnings guidance for full-year 2005 remains unchanged: We continue to expect a slight increase in operating profit compared with the prior year (€5.8 billion), excluding charges related to the realignment of the smart business model.

Forward-looking statements in this Interim Report: This document 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 CORE program by the Mercedes Car Group and the new business model for smart; supply interruptions of production materials, resulting from shortages, labor strikes or supplier insolvencies; the resolution of pending governmental investigations; and decline in resale prices of used vehicles. 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 forward-looking statement, which speaks only as of the date on which it is made.