Dieter Zetsche, chief executive of Germany’s largest luxury carmaker, spent an hour reflecting on where he and the company are heading in an interview in Stuttgart’s Mercedes-Benz museum.
With two million cars sold, countless ideas about the future of mobility and his own new, more casual image, Mr. Zetsche had plenty to discuss with Gabor Steingart, Handelsblatt’s publisher.
He talked about his relationship to Germany’s famously anti-car Green party, about Daimler’s route to e-cars, and how transformation matters – on a technological but also cultural level. He also outlined visions for revolutionizing delivery as e-commerce takes transportation and logistics to new limits.
Handelsblatt: Mr. Zetsche, when you look out your office window in the morning, how do you feel?
Dieter Zetsche: This year several things happened that make you think and perhaps even worry. But we should accept an event like Brexit as a given and try to make the best of it. But when I look at my own situation, I have to say that the company is doing well and so am I.
You just got married and became a grandfather for the first time. Congratulations!
Thank you!
You’re a powerful man as Daimler’s chief executive and not just here in Stuttgart. But when you think about other powers in the world from Google to politicians like Trump, Putin and Erdogan, does that make you feel big or small?
I don’t feel small. We are a large company with a fantastic history. We have exceptionally competent employees and we know what we’re doing. That’s a good place to start from. Still, sometimes you do have to almost force yourself to relax and take an evening to celebrate the team’s achievements.
Why do you have to force yourself?
If we look into the future, many things are uncertain. That’s what shapes our times and it’s why we need to develop our company to be as flexible and forward-looking as possible. That’s in terms of technology and finance but also the hearts and minds of our employees.
We live in an age of unpredictability. At the same time, companies make very detailed plans, including Daimler. How do you reconcile these two things?
We have to plan precisely because it takes five years to develop our products, from conception to market launch. We can only succeed if we bundle our vehicles into families, and if we extend architectures with identical components into different vehicles. To do that we don’t just have to think in five-year periods, until the first vehicle reaches the market, but way beyond that, in fact, about the entire vehicle family. At the same time, though, the underlying political conditions in our industry are very fluid.
…and when a bank like Lehmann Brothers collapses, that impacts your balance sheet. Daimler sales plunged by 35 percent in 2009. You were losing money and suddenly you weren’t a player any more but had to react to events.
Sure. That’s why it’s important to pursue long-term strategies, like emissions-free and accident-free driving. Those are fixed goals we’re oriented towards as a company.
What about you personally, are you an accident-free driver?
Yes, for the last few decades, aside from a few scratches and one point on my license.
You also spoke at the convention of the Green Party. You came through unscathed, even though it’s famously anti-car. What took you there in the first place?
The party leadership approached me and I accepted their invitation to a dialogue. People warned me in advance to wear a washable suit, those warnings were unfounded. After a brief protest at the beginning, I also earned a lot of applause, which I hadn’t expected. I had the feeling people were listening to me.
So you would…
…do it again anytime.
You also get along well with the premier of this state who’s a Green Party politician. What would you say if the Greens were part of a national coalition government?
The Greens have come a long way since entering the Bundestag. Many of their politicians have developed a strong sense of responsibility. Besides, I think it’s important that various positions are taken in a pluralistic society, which hopefully leads to a good outcome.
You’ve also changed your image and now tend to wear jeans and sneakers, like former Environment Minister Joschka Fischer. What’s that about?
First of all, it’s more comfortable. More importantly, though, we’re on a roll, as a brand and a company. The brand isn’t the same as it was 10 years ago, it’s now more dynamic and relevant, younger and perhaps more exciting – some would say cooler. In that way, how I look is closely related to what’s happening in the company.
So as a corporate boss, you reflect the transformation that’s going on in the industry and your own company. Is that right?
Culture is enormously important. Autonomous driving, networking and introducing e-cars – all these developments require fast changes. But what matters almost more than the technology is how we work together. We have to act quickly and can’t afford to focus only on ourselves. It’s not primarily about outward appearances, but they too are important.
So as a convert CEO what would be your message be?
We are approachable, and we don’t live in an ivory tower.
Will you dress casually for the next shareholders’ meeting?
I won’t be wearing a tie, at least. I wasn’t allowed to do that last year, when some colleagues told me that if I did, investors would stop buying our shares. Let’s see how it goes this time.
Shareholders and employees are mainly interested in your ideas about the future of cars. This brings me to the next question: Is autonomous driving really what customers want?
Today Daimler represents the vision of accident-free driving. And perhaps autonomous driving isn’t as revolutionary as many people think. We’re already working with assistance systems today: ABS for brakes and ESP to prevent skidding. And finally, now we’re intervening in steering systems to drive around obstacles. After making all these interventions everywhere, autonomous driving really isn’t such a stretch anymore. It’s an evolutionary path.
You’re also thinking ahead to have trucks driving in convoys on the autobahn soon, linked by digital transmission technology.
In that case, optimizing fuel consumption is also a factor. The first truck in the slipstream consumes almost 11 percent less fuel than the first truck in the convoy, and the next truck is still saving 9 percent. But it’s also about using the driver’s skills better. Rather than steering, the driver can be planning the next trip and making arrangements for the cargo.
You believe in the good in people. Isn’t it more likely that the driver will be watching videos and texting his girlfriend?
We shouldn’t idealize everyday life on our roads. Nine out of 10 accidents are the result of human error. We don’t drive as well as we think. Autonomous driving helps us to improve. On the other hand, one day when there’ll be robot taxis on demand, I’ll be able to use smartphones to organize mobility. In a driverless car, I can use my time in different ways – I can work, play or do whatever I want. But that doesn’t change the fact that we want to build cars to fulfill dreams.
What does that mean exactly?
When I’m on a country road in nice weather, I might prefer to drive the car myself. But when I’m stuck for half an hour in morning traffic on the A8 autobahn, it isn’t nearly as fun. And if I can do something else with my time than sitting at the wheel in stop-and-go traffic, it becomes a huge benefit.
Cars will handle routine driving on their own in the future. So why have a steering wheel at all?
We believe that customers should be able to drive themselves if they enjoy it. But you never rule anything out. If there’s a closed mobility system with robot taxis, I don’t want to rule out the possibility that we’ll also be involved in the hardware. And in those cases, the vehicle would no longer have a steering wheel.
Will we live to see cars that are capable of driving completely without human help?
I very much assume that will be the case. Of course, I can’t make individual predictions about what a particular individual will live to see. But health is also an important issue for us and we can accompany people in cars at different levels and determine how they’re feeling, whether they’re sweating or too cold. We can then help with massages, light and ventilation, for example. When they get out of their cars, people will feel healthier and more relaxed than ever before.
You also want to revolutionize the way goods are delivered. Here in the lobby of the Mercedes-Benz Museum, there’s a vehicle called the Vision Van, which will soon be able to deliver packages with drones that take off and land on its roof. Sounds like science fiction to me.
E-commerce takes us to the limits of logistics and distribution. Amazon and DHL have done a great job so far in figuring out how to accept orders and ship goods. But there’s still enormous untapped potential in the transport and delivery of goods. We want to use these technologies to better utilize roads.
We have already seen many visions at Daimler, including Edzard Reuter’s integrated technology group and Jürgen Schrempp’s World Inc. But in the end, their successors had to take things back to where they were before. Is it really any different this time?
Yes! Because this time we are focusing on the product, our hardware. We will now use new software to refine this hardware. But if we said, things are going well and we’re making huge profits with the hardware, then we might not exist in ten years – or just in a very rudimentary form.
Because as a strategy, it’s no longer sufficient to just focus on the hardware – the car as we know it?
Because everything is ultimately up to the customer. With Amazon, I can press a button and have a book shipped to me. But if I have to spend three weeks digging through catalogs to buy a new Mercedes, it doesn’t work in the long run. Eventually someone else will take care of that for us. And then we won’t have any direct contact with the customer anymore.
So what do these customers look like? And how many of them exist?
We need to broaden our focus, especially with service. We need to offer one customer the option of picking up the car from home. Another customer pays less and gets a different level of service. And in the future we will replace a portion of visits to the shop with downloads. In general, we have to develop an ecosystem of services surrounding the product that’s based on various types of customers.
Companies in the industry don’t seem to be entirely sure what exactly the customer wants. VW Chief Executive Officer Matthias Müller said recently that Germans like to talk about electric cars but wouldn’t touch them with a 10-foot pole in the showroom. Is he right?
There is no such thing as “the customer.” Our customers represent everything you can imagine. I’m convinced the most likely scenario is that in 10 years we will be offering 20 percent of our vehicles with electric drives. But in 10 years we will also see cars which are just as cool produced by our high-performance division, AMG, which will operate very efficiently with internal combustion engines.
The world in which one thing was good for everyone is disappearing. It’s creating a highly complex situation for all producers.
Absolutely. We can see that companies like Google are trying to cover many different aspects of life. Our goal must be to develop our own ecosystem, which is why we teamed up with BMW and Volkswagen to acquire Here, the mapping company.
Google has enormous financial clout. The company generates more than twice as much profit as Daimler’s €8.7 billion ($9.3 billion). Daimler’s market capitalization is about €70 billion, while Google’s is about $500 billion. The company has enormous financial resources and can raise virtually unlimited amounts of money in the market. What’s your strategy?
We’re in good shape, in terms of both our understanding of our business and our financial resources. We are certainly one of the top players within our industry. But we also accept that there may be competitors who, like Tesla, have not been a part of our industry until now. But car manufacturing isn’t just one discipline, it’s a decathlon.
But then there are companies that don’t see it as a decathlon at all. They focus on only one part of the car, such as the brain.
That’s why I’m not saying that we will automatically be successful. We need to improve in certain fields in Germany, such as artificial intelligence. It’s insufficiently developed throughout Europe. To find the necessary competencies, we go to Shanghai, Tel Aviv, Silicon Valley or Pittsburgh.
Many people wonder what will happen to employees when we have electric cars. The skills needed to build an internal combustion engine are fundamentally different from the skills needed to build electric cars.
This change will affect many workers. But people will acquire new skills. In the end, we are likely to need more, not fewer people with these new skills. The same thing happened with the introduction of the steam engine and electricity. We shouldn’t try to preserve the boilerman on the electric train. In the past, old top dogs disappeared and new ones were created in their place. We want to and can prove that the opposite the case.
Economic processes on this scale also have the potential to change political structures. Feudalism disappeared with the approach of industrial society. Democracy disappeared in Germany and elsewhere after the early upsets of market capitalism in the 1930s.
When it comes to the present, I’m not pessimistic. When you see the structural transformation currently taking place in a country like China, it clearly seems possible to bring about such deep transformations in a largely peaceful manner.
Many managers admire China. Is transformation more effective without democracy?
It’s always easy for business people to criticize politicians, and to say: “Just look at all the things they are doing wrong.” That doesn’t do us any good. If we focus on the truly important things, such as the transformation you mentioned, we stand a chance of inspiring people. A modern economy with greater prosperity is ultimately appealing.
In order to remain successful, you’re going to change the management culture and streamline the decision-making process. What exactly are you planning?
In the future, two hierarchy levels need to be enough to make decisions. Often, six are involved today as we try to make sure no one is left out, and everyone has a say, and it just keeps on going. In the end, the last person who addressed an issue is the one presenting it to management. That makes no sense. We have all reduced the decision-making processes so that only a very small portion need to pass through the entire organization.
The brand is ultimately the most valuable thing you have. How do you keep such a traditional, brand young and attractive for new generations?
At Mercedes, we are convinced that our business is luxury, not premium for all. But we know it has to be young and modern and we have to keep interpreting it anew. We have changed the product tremendously, partly through design. Almost every week, I spend several hours in the design department. We have now managed to appeal to people who used to say: For God’s sake, I don’t want to go near those cars for people who wear hats.
According to Peter Drucker, an America management expert, you only recognize a good leader after he has left his corporation. How do you want people to remember you?
I want to create the conditions for us to be one of the top players in a world of electric vehicles and autonomous driving in 10 years. I want people to say: Mercedes, now that’s a shining star.
Gabor Steingart is the publisher of Handelsblatt and Handelsblatt Global. To contact the author: [email protected]