Dieter Zetsche
The Daimler CEO is facing major challenges.
(Photo: AFP / Getty Images)
Stuttgart, Dusseldorf, FrankfurtAll headlights are aimed at him. Before you start, smile Dieter Zetsche again briefly. He finally knows what’s coming. “Hey Mercedes, tell me a joke,” he says Daimler-Chef in front of 400 invited guests at the premiere of the A-Class. “I’m sorry, my developers were Germans,” replies the car. Like now, Zetsche ponders: Swabians should not have humor? “I totally disagree,” the manager replies with a wink.
The joke arrives. Zetsche is celebrated on this February evening in a former ship engine factory in Amsterdam like a pop star. Dozens of fans clomp around the mustache bearer to take a selfie. Much better would the man who has been the fortunes of more than twelve years Daimler Certainly, the world public can not present its first “smartphone on wheels” together with clever voice assistant.
65-year-old Zetsche is the only German world-class manager. The best seller of the republic. In his choreographed performances, he looks cool, self-ironic and convincing. Last year he was over the Career platform Glassdoor from its employees to the most popular manager in Germany named.
Zetsche is at the forefront of the automotive world, sees himself on an equal footing with the greats of Silicon Valley. For 42 years in the group, for twelve years at the top. But on the final stretch of his career, he loses the ease.
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Who watches Zetsche these days, experienced a driven. The charming style and the carefree performance, which he celebrated a few weeks ago, have given way. Those who know him better describe him as lead. No wonder: In his group, the problems stack up. And more and more others are setting the agenda.
Next week, the Daimler boss again to the rapport at Transport Minister Andreas Scheuer (CSU). Apart from the diesel ultimatum from Berlin simmer according to information of the Handelsblatt from group of circles however still further crises. The EQ brand has started too late, now the schedules for the first model, the SUV “EQC” can no longer be maintained.
Smart is missing with the sudden departure of Annette Winkler not only the leadership, but also a strategy. And behind the scenes, the new major shareholder Li Shufu pressure: Daimler should Volvo participate, a daughter of Shufus GeelyCorporation. Specifically, the Chinese wants that Daimler’s competitors Volvo Motors delivers and even takes over shares. Gritting his teeth, the Mercedes managers get into an unloved cooperation.
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It’s rumbling at the Daimler headquarters in Stuttgart-Untertürkheim. Executives complain about the stoppage. It lacks the discussion, the open struggle for solutions. “With the departure of Wolfgang Bernhard one of the last figures left, who represented an open opinion in the executive committee”, describes a manager the situation. Bernhard, a long-time companion of Zetsche’s career, threw in the towel in early 2017, because he no longer saw any chances for the CEO.
Since then Dieter Zetsche is both: Mightier than ever and at the same time driven as never before. His plan to move from the Board of Management to the Supervisory Board in 2019 with brilliant figures is a year before the finish. True, the numbers are correct. Sales, sales and profits are at record levels and the eternal rival BMW stays at a distance.
But at the end of the era of Zetsche, others decide where to go: The major shareholder Li Shufu, who openly challenges Zetsche’s corporate policy with his involvement, The prosecutors in Stuttgart, which extend their investigations to other engine series and their findings are also known to the Federal Motor Transport Authority (KBA). And, of course, the new Transport Minister Scheuer, who does not exercise any leniency on his own account.
Zetsche, who has successfully mastered all crises in the Group for more than two decades, is counted in the final meters. If he wants to recommend himself as the successor to Supervisory Board Chairman Manfred Bischoff at the 2019 Annual General Meeting, he must tackle the following five problems.
1. Risk diesel
The deadline is short, the rush is great. Daimler has not even one week left to disclose all questionable functions of its OM 622 and 626 diesel engines to the Federal Motor Transport Authority. Leading Daimler managers assume that the authority will complain about other Mercedes models in addition to the van “Vito”, for example, the popular C-Class. This would call for at least 120 000 cars recall, but it could also be up to 700 000, Scheuer had threatened in a conversation with Zetsche last week.
The hitherto unknown determination of the authorities puts massive pressure on the Daimler boss. He said in 2015 that Daimler had neither manipulated nor cheated on its diesel engines. If this sentence turns out to be wrong, then high penalties are threatened and Zetsches position would be damaged. Alone in Germany could be due to 3.75 billion euros, as Transport Minister Scheuer had made the Autoboss according to industry at the beginning of last week clear. First, the “mirror” had reported about it.
After two years of tactics and idling Daimler stands with his back to the wall. Zetsches internal investigators no longer have an information advantage. The authorities have long been well informed about the processes in the group. In a raid last year, the Stuttgart prosecutor had seized extensive documents.
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In addition, there is the supplier Bosch, who has unpacked extensively at the authorities in the US and Germany. Bosch is the supplier of the software with which the Exhaust emissions of diesel cars should have been reduced without permission, Daimler, complain the internal enlightener, is now compared to the prosecutors glass. Building a defense line on this basis is difficult. Especially as consequential damage threatens investors could feel deceived and claim compensation. In the US, class actions are pending, and the US Department of Justice has also intervened.
According to Handelsblatt information, an agreement in the US is imminent, a confession of guilt in Germany could jeopardize a deal but shortly before its conclusion. Also, therefore, Daimler wants to appeal against the recall decisions of the Federal Motor Transport Authority and, if necessary, drag them to court, as it is called in business circles. Even if Daimler would submit to the dictates of the Minister of Transport – it remains to continue to demonstrate the legal conviction of their own innocence.
2. Shaky electro-offensive
Diesel is the best-selling propulsion system in Europe. The consumption-efficient diesel engine should keep the climate balance of the Mercedes fleet in the Lot. Of course, Daimler is still a good twenty percent above the required limits for 2021, with emissions even rising slightly in the past year. If Stuttgart exceeds the EU’s fleet target of a maximum of 95 grams of CO2 emissions per kilometer driven in three years, high fines are due.
Without diesel, which emits up to 15 percent less climate-damaging carbon dioxide than a gasoline engine, it will be difficult to comply with the limit values. It will be impossible without electric cars. For a long time Mercedes has been waiting with its Stromern, the rival BMW and Tesla left the precedence.
Driven by the exhaust scandal, Zetsche gave the signal for departure at the Paris Motor Show in 2016: “Now we turn the switch,” he explained. A dozen new electric cars should first be launched by 2025. Shortly thereafter, Zetsche sets this target to 2022, also because the competition entered the new business.
The pressure is on Crown Prince Ola Källenius. The development board has taken his place after Bernhard’s departure at the boardroom next to Zetsche and should bring the “EQC” finally the first electric car from Mercedes on the road. The vehicle is basically finished, but there are problems with the supply of batteries, the Handelsblatt learned from group circles. The bottleneck is difficult to eliminate – but Källenius wants to keep the schedule outwardly partout.
His solution: In early September, the “EQC” will be presented in Stockholm, confirmed a Daimler spokesman. According to group sources, the Stromer will not go on sale until June 2019 at the earliest. As a result, the start-up of the “EQC” is delayed by several months compared to internal planning. Daimler emphasized that the model will come on the market as announced. Audi However, it is much faster: The VWSubsidiary intends to deliver its E-SUV “Etron” from 2018
The lack of batteries at Mercedes not only slows down the “EQC”. Other electric models from Daimler threatens a stutter start. Already, customers have to wait almost a year for an E-Smart. According to industry circles, the new S-Class will be launched in 2020 still as a combustor. It is feared that the electric version could follow only a year later. For the most important sales market China, where electric mobility is currently gaining momentum, a weak statement. Their slogan “The best or nothing” can not be fulfilled by the engineers from Swabia.
Not only technically is the electric car an adventure. “The stock market is skeptical about whether Daimler can achieve the same profitability in the course of the electric car wave as it does today,” says Ingo Speich of Union Investment. Specifically, shareholders and stockbrokers fear that the record-breaking journey by Daimler with a net profit of almost EUR 11 billion in 2017 alone could now be followed by leaner times. For the product portfolio of the Swabians is gradually getting old, competitors are following suit. “There is a risk,” says Speich, “that Daimler now falls into a hole and is overtaken by competitors such as BMW.”
This concern depresses the stock price. Was the paper from Daimler at the beginning of the year still worth more than 70 euros, it is currently only 62 euros. In the past week alone, the price of Daimler shares fell by almost five percent. In addition to the group’s homemade problems, the “imminent tariffs on Mercedes cars in the US, negative currency effects and any economic dips” would unsettle investors, explains fund manager Speich.
3. The demanding major shareholder
The problems with the electric cars are likely to appeal to the new major shareholder from China little. Li Shufu, founder of the Chinese car brand Geely and owner of Volvo Passenger Cars, had bought just under ten percent from Daimler in February with one stroke and thereby taken the management by surprise. The leadership around Zetsche had expected a much smaller participation.
When asked about this, the Daimler boss reacted increasingly irritably. The participation of Shufu was “nothing completely unusual, or world-moving,” Zetsche said last April. At home in Stuttgart, of course, it’s been booming since the Chinese counted among the shareholders.
Shufu changes the statics in the Daimler Reicheven if the new investor is humble. “Daimler is an outstanding company with first-class management,” explained the founder of Geely. But: “The competitors who challenge us technologically in the 21st century do not come from the automotive industry.” To meet the “intruders from outside” with united forces, it needs friends and partners. “It’s time for a new way of thinking. My involvement with Daimler reflects this vision. “
The friend and partner makes demands. Not public, but behind closed doors. There have been several meetings between the Chinese and the Stuttgart, it is said. The representatives of Li Shufu are said to have criticized the ongoing investments in diesel technology. It would be better, so the advice of the Chinese, the money to invest in electric mobility.
In addition, according to a demand, Daimler should cooperate with the Geely subsidiary Volvo and take over at least a part. The reluctance in the ranks of the Mercedes-responsible is great. Volvo is a competitor, complains a manager. In addition, the Swedes maintain a joint technology center in Gothenburg that enables the transfer of European technology to China. Nevertheless: The request of the major shareholder Zetsches Mannen could not close permanently, according to industry circles.
With the Chinese in the circle of shareholders pressure is increasing. In view of the growing uncertainty in diesel, the price of Daimler shares is eroding rapidly. Investment bankers are already discussing that Li Shufu could increase his stake to as much as 15 percent. Zetsche should not see this as a threat, but as an opportunity. For a strategic investor from China would deter activist shareholders. They could demand the destruction of Daimler.
The danger is real, as is the case Thyssen-Krupp shows. The industrial group from the Ruhr wants to break down aggressive shareholders into its individual pieces. Mag Geely might be uncomfortable, locusts would be the nightmare for Zetsche.
Beijing Motor Show: BAIC and Geely – Daimler CEO Zetsche sits between the chairs
At the same time, however, Zetsche must proceed with care and must not be too accommodating to Shufu – especially in China. Alliances and cooperation between Daimler and Geely are conceivable in the Middle Kingdom, for example in mobility services. But the Stuttgart already have a joint venture partner in China with BAIC. “Daimler must be careful not to scare BAIC“Warns a trade connoisseur. The melee situation is explosive, requires diplomatic tact. After all, BAIC and Geely are competitors. A dispute among the partners could have fatal consequences. China is the most important sales market for Daimler. More than a third of their vehicles are sold by the Swabians in the Far East.
Zetsche knows that. At the Beijing Motor Show, the world’s largest automobile trade fair, he demonstratively embraced Xu Heyi, Chairman of BAIC. Inniglich chatted the Daimler boss with his “good friend” and praised the great cooperation. “We’re shaking hands to usher in a new era,” Xu Heyi replied Zetsche’s affectionate gestures. On an over-sized, about six-car-long canvas, the already unambiguous message was underpinned with a symbolic photo in the background. It showed a powerful handshake of two men. Shufu, who appeared at the Volvo booth at the same time, kept Zetsche at bay.
4. The problem child Smart
In February, BMW boss Harald Krüger announced an ambitious project: Mini, the small car brand of the Munich, wants to build a large electric car plant in China together with Great Wall. The e-minis should open up for BMW the fast growing market for electric cars in China. An ambitious plan, the two partners want to quickly come to large numbers, China is the mini-market of the future.
In contrast, the mini-competitor Smart Tristesse prevails: Even after twenty years, Mercedes has not managed to get the mark from the losses. The numbers and the success of the Mini, the Smart does not approach. The concept was changed several times, new strategies were developed and rejected. Since the beginning of the year, sales are seven percent below those of the previous year.
Now the boss leaves: Annette Winkler, the long-time confidant of CEO Zetsche will vacate her chair after eight years at the helm for September. She stumbled loud group circles on the weak performance, but should also have a dispute with Britta Seeger. Zetsche had surprisingly entrusted Seeger with the sales department last year.
It is not only who succeeds Winkler, but the future of the Smart brand as a whole. Originally, the small electric cars should reduce the fleet consumption of Daimler and thus bring the group closer to the EU climate prescriptions. But the small engines too rarely meet the fuel consumption requirements.
For the carbon footprint is now mainly the Mercedes-electric brand “EQ” in charge, which is massively expanded. In the weakly utilized Smart Hambach plant now also the “EQA” is to be built, the planned electrical variant of the A-Class. Although Mercedes has made the fundamental decision to change the smart on electric drive. Whether the new major shareholder Shufu can imagine a joint production in China, but so far is not known.
5. The conversion
The pressure of investors is growing, the shareholders are pushing for focus, if need be even on splits. Even before the arrival of Li Shufu Zetsche and CFO Bodo Uebber had the idea for a liberation: The company is to be restructured into a holding company. Although the conversion is officially still an option, internally, the maneuver has long been decided. The individual divisions (Passenger Cars & Vans, Trucks & Buses and Financial Services) will be given more autonomy under the umbrella of the parent company; in theory, an IPO of the truck division is also conceivable.
Investors have been calling for that for some time in order to get more potential out of the stock. Zetsche, who, like CFO Uebber, likes to be credited with the idea of the holding company, wants to implement the plan at the Annual General Meeting in the coming year as CEO. Then the shareholders should agree to the restructuring. Zetsche could then make the top job as a doer and visionary and recommend himself for even higher ordinations.
His calculation: With the transformation into a holding company, the shareholders could also enable him to move into the Supervisory Board more quickly. Actually, Zetsche would have to pause for two years if he resigned from the position of CEO – as prescribed by the Corporate Governance Code, to which Daimler has committed itself. If a quarter of investors agree, a board member can also change without a break. Just like BMW supervisory board boss Norbert Reithofer, who was also allowed to change to the supervisory board in 2015 without detouring from the management board, thanks to the goodwill of the Quandt family.
Zetsche does not have such an advocate. Unlike BMW and Volkswagen lacks the Daimler boss a major shareholder who protects him. He must now rely on his proven skill to survive the last delicate months safely. Whether his last big plan works out is more questionable these days than ever. Zetsche closely coordinates with Daimler Supervisory Board Chairman Manfred Bischoff. “No sheet of paper fits between the two men,” says a leader. The now 76-year-old bishop has had his contract extended with some gimmicks until 2021, to keep Zetsche the chair at the head of the control committee.
Union investment manager Ingo Speich is actually a fan of the proposed holding. But he warns more precautionary: “company goes in front of person. The structure must not be abused as a vehicle for transport. “
The early determination that Mercedes had not manipulated or cheated in the diesel affair, Zetsche could overtake in the last year of his term yet. The prosecutor’s investigations paralyze the company, each recall scratching Zetsches reputation. The smart debacle, the delay in the e-models and the demanding major shareholder additionally cause unrest in the house. And so these days, the question of how Zetsche will be remembered by posterity: Is there a second case Volkswagen and a manager who crashes at the zenith of his creation? Or is Zetsche able to weather this situation as well?
The car is familiar with such situations: At the beginning of his term in January 2006 Zetsche sold the loss daughter Chrysler and thus laid the foundation for the resurgence of Mercedes. With an unprecedented model offensive, he managed to rejoin the top of the industry. In the final months of his career, it is decided whether Zetsche will make an era out of a term.
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