Daimler Trucks
Orders for new trucks declined sharply.
(Photo: Daimler AG)
Munich The times at Daimler are rough. The core brand of the Dax group is currently shaken most violently. Just a few years ago, Mercedes cars and vans were consistently delivering sales returns of more than nine percent. Today, the people of Stuttgart would be happy if they could offer half of them. But that also fails.
After nine business months, the Swabian margin in the car sector is a measly 3.1 percent. With its vans, Mercedes even posted losses. The minus after three quarters is two billion euros not least because of various recalls due to the diesel scandal came about. Mercedes is weakening considerably.
2018 could Daimler cover up the problems in the Cars and Vans divisions a little. After all, the Swabian colossus has another large division with trucks. The Group’s heavy trucks and buses contribute almost 40 billion euros to total sales of 167 billion euros. In 2018, Trucks even increased its return from 6.7 to 7.2 percent, making it a ray of hope. But Daimler is now increasingly worrying about its second most important unit.
Since the summer there has been an increased alert. Because sales shrink slightly and orders collapse drastically. Specifically, orders for new trucks fell from 457,000 to 289,000 vehicles from the beginning of January to the end of September compared to the previous year. This corresponds to a drop of around 37 percent; the order backlog in the core North American market has more than halved. The situation in Europe is particularly critical.
“We have a difficult situation at our assembly plant in Wörth,” Daimler Works Council chief Michael Brecht told Handelsblatt. In August, the belts in the largest factory for Mercedes trucks came to a standstill one day a week. In the meantime, the more than 10,000 employees in the plant on the Rhine work again every five days, but the daily production has been adjusted to the declining demand. A few hundred contract workers have already had to leave.
“The Gaggenau location is also affected,” complains Brecht. The workers’ guide once trained as a locksmith himself in the factory that produces axles and transmissions for heavy trucks. Now he is worried about the occupancy. The time accounts of the approximately 6400 employees in Gaggenau are still well filled with an average of around 160 free hours.
“But these flexible control instruments are finally”, warns the deputy head of the supervisory board of Daimler-Trucks: “We need more orders. If this continues until January, we have too little water under our keel to be able to steer properly. ”
Fixed costs are too high
According to calculations by the market researchers at IHS Markit, Mercedes truck production in Europe is likely to drop by more than 14 percent this year – from 101,500 to 87,000 units. There will be no improvement until 2021. On the one hand, Daimler Trucks, like the rest of the industry, is suffering from the cyclical downturn in the truck business.
After years of growth, many freight forwarders are currently supplied with sufficient vehicles and can delay the updating of their fleets, partly in the hope of generous discounts from the manufacturers. On the other hand, Daimler struggles with homemade problems.
Despite its economies of scale, the world’s largest commercial vehicle manufacturer has always lagged behind smaller competitors such as Scania or Volvo Trucks clearly lagging behind in terms of returns. The reason: Daimler’s fixed costs are simply too high. However, it is important to differentiate between brands and regions.
“Our crown jewel is business in North America,” said Daimler Trucks boss Martin Daum recently in front of investors. In the United States, his company with the Freightliner brand is top in sales and profitability. Daum, on the other hand, referred to Mercedes trucks in Europe as a “problem child”. Here you have the best semi-trailer truck on the market with the Actros, but unfortunately not the best cost structures.
Daimler-Trucks had only set up a savings package in 2017. In the course of “Stream”, 2000 jobs were cut. These efficiency measures have been fully effective since this year, but they are not enough. “We still have far too high fixed costs,” said Daum at the Daimler Capital Markets Day in late November.
He wants to cut ten percent of managerial jobs and save € 300 million and € 250 million in staff as part of the new “Go4four” diet program, for example by reducing the variety of models and engines.
“If management wants to save more than half a billion euros in Europe again, this can only be done by reducing the complexity and not the minds,” says works council chief Brecht. Finally, the truck manufacturer had a lot of business done by third parties. “These outsourced contracts have to be checked,” says the employee representative.
Brecht is also disposing whether Daimler really has to meet all of the customer’s wishes, especially since the willingness to pay is not always available for every technical frills. “That creates unnecessary complexity,” says the 54-year-old. “Conversely, in addition to high-end products such as the Actros, many logistics companies also want an affordable entry-level model. We have to focus more on this topic. ”
In fact, Daimler 2020 should also launch something like a slimmed-down version of the Actros, according to corporate circles. With this, the people of Stuttgart hope to get larger volumes again. According to the IHS, the market share of Mercedes trucks in Europe has decreased continuously since 2014 – from 23 to currently less than 19 percent.
A few weeks ago, Daimler board member Daum spoke to his key executives about his conscience. The performance is unsatisfactory. But Daimler’s top trucker doesn’t want to know about a real crisis. At least not yet.
More: In parallel to the Mercedes cars, the Group’s trucks and buses are also to become climate-neutral almost everywhere in the world by 2039. For this, Daimler demands subsidies.