Ola Källenius
In office since May 2019 – but only now is he tightening the austerity course.
(Photo: Verena Müller / laif)
Munich, Frankfurt In the middle of the corona crisis sharpens Daimler-Boss Ola Källenius his Strategy and trims the automaker for return. “We want to go back to our core as a manufacturer of modern luxury vehicles. The future of Mercedes is more at the top end of the vehicle segments, ”said Källenius in an interview with the Handelsblatt. An expansion into lower passenger car segments, such as its predecessor Dieter Zetsche undertook, he refuses. “We don’t want to compete with volume manufacturers,” says Källenius.
The Swede takes on the Realignment of the model portfolio of the brand with the star the French luxury goods company LVMH to the role model. “For us, price is more important than quantity,” explains the 51-year-old. The manager plans to consistently expand profitable sub-brands such as AMG and Maybach.
“If we focus on luxury as our core, we are on the right track,” says the Daimler-Boss. When it comes to electromobility, Källenius has high hopes for the EQS electric limousine, which from 20210 has a range of more than 700 kilometers against the models from Tesla starts. “This will enable us to significantly strengthen our position,” the manager believes.
Read the full interview here:
Mr. Källenius, Daimler was Welt AG, an integrated technology group and on the way to becoming a networked mobility service provider. What does the company stand for in the future? We want to go back to our core as a manufacturer of modern luxury vehicles. The future of Mercedes is more at the top end of the vehicle segments. We want to grow profitably here. An expansion downwards is not our goal. We don’t want to compete with volume manufacturers, we want to build the most desirable cars in the world.
As part of this focus, do you say goodbye to compact vehicles that Daimler has increasingly launched onto the market in recent years? Not necessarily, the compact car segment is still attractive. But we also want to carefully expand our premium premium here. That means: We look very closely at which vehicle positions promise the highest returns in the future. We want to develop there.
Sounds like you’re like luxury companies LVMH as a model, who keep their prices high due to a shortage of their offer. In the future, we will pay even more attention to the profitability of our sales. But that doesn’t mean we can’t grow. We’ll grow. LVMH did it as a luxury company, so the comparison is not entirely wrong.
But with a focus on upper price segments, Daimler will inevitably shrink. The number of wealthy customers is finite, which is not true. First of all, we see that the number of people with an income of over 250,000 euros per year is growing. We see this development all over the world – not only in China, but also in Western Europe and North America. The trend benefits us. You have to see: Our global market share is two percent today. But there are also many people who can afford a Mercedes. We want to inspire them, including with a number of sub-brands that we will strengthen.
Maybach luxury brand
The expensive Mercedes brand is also said to have electric models.
(Photo: Gilles ROLLE / REA / laif)
You mean AMG or Maybach, which stand for sporty driving and luxury. There is still a lot of potential in there that we can leverage. After Maybach’s revival as a luxury brand, a lot will come. Wait and see! But we still see growth opportunities in classic off-road vehicles.
Doesn’t this strategy bite with the environmental goals that Daimler has committed itself to? We stand by the goals. All of our cars will be electrified, and AMG will also be electric in the next five to ten years. This is how we bring sustainability into harmony with luxury. By 2039, production and products will be climate neutral.
You have been with Daimler for more than 25 years and have been from your predecessor Dieter Zetsche thoroughly prepared for the job as CEO. Did you have a plan right from the start of what Daimler should become? Of course I knew where I wanted to go and which technologies were the focus. However, you only know what it is like to be CEO of such a company if you are really in the position.
Did you have an eye-opening experience? I realized that we will only manage the transformation with a much better cost structure. After this insight, we tackled the topic in autumn 2019. Then came Covid-19. Now we have to readjust. It is crucial for Daimler’s success that we are leaders in the areas of electrification and digitalization. The investments required for this are huge. Without a better cost structure, we lack the money.
Endangers the corona pandemic the success of your strategy? The global car market will collapse by an average of 20 to 25 percent this year. We will do better, but with Covid-19 we also had to rethink. We had to focus on the short-term perspective. As hectic as the first four months of the pandemic were, I had a certain calm in the eye of the storm to think about what is important for the company in the long term. If we focus on luxury as our core, we are on the right track.
Vita Ola Källenius
Are you really on the right track? Daimler can seem sluggish at times, and you should never rest. On the day when you think you have everything under control, you don’t drive fast enough. You have to carry this inner unrest. If there is justified criticism, it is that we have to do more about the cost structure. We tackle that.
Is Daimler a restructuring case? Of course we are not. But we have to face the question of costs. This is the only way we can improve profitability in the short term and at the same time investments in future technologies to stem.
You have announced that you will sell your plant in Hambach, France. According to insiders, you are also considering separating from a second foreign plant. Is it necessary? We basically look at everything. At the moment we have nothing to announce.
So you’re not excluding it? We’ll look at everything.
Part of the conversion is also a major job cut. More than 15,000 jobs are to be cut. How far are you in talks with employee representatives? Last autumn we announced that personnel costs should be reduced by € 1.4 billion by 2022. This number will now be larger and we will also extend our cost measures over time, i.e. beyond 2022. Covid-19 has led to a demand shock that will keep us busy for a long time. We have to react to that. We are currently discussing internally what the measures will look like. I will therefore not give specific figures.
The history of Daimler is characterized by great successes and deep crashes. Will 2020 be the low point of your term in office? Yes, certainly. We had a unique event with the corona crisis. We saw crashes of around 50 percent. But if we do our job right now, we will be able to significantly improve our profitability as demand recovers. There is already a ray of hope in China. The growth there is above the value of the previous year. It is remarkable.
China is very important to Daimler – also with a view to investors Geely and BAIC. What role will these major shareholders have for Daimler’s future? As a longstanding partner, BAIC has helped us a lot to build up a strong position in China. Nothing should change about that. In the next ten years, China will be the fastest growing market – and we will cooperate with BAIC.
Geely is obviously pursuing a different strategy after joining two years ago.Geely founder Li Shufu participated with us, because his company sees the future of the automobile among others at Mercedes. He is a long-term investor who has a vision similar to ours. This makes Geely a strong partner for us. We have already identified a major project, the production of smart vehicles in China. With the all-electric versions of the small car and the cost structures in China, we have the opportunity to bring the model to the market profitably.
Will Daimler work more closely with Geely in the future? Of course, other projects are conceivable. But they have to be worthwhile for both sides. Only because of the desire to cooperate, we do not do this.
The Swedish manufacturer Volvo belongs to Geely. Is there a closer connection to a merger possible? There are no business games to add another brand. A merger is therefore not planned. Volvo is, however, a possible partner in various areas.
Are you not worried about this dependence on China? The country is your biggest market and two of your biggest shareholders come from there, and I keep hearing this concern about a possible cluster risk. If we were to hold back in China, however, it would run counter to our growth plans. So that doesn’t make sense. A strong position in China is essential for premium manufacturers.
Tesla manages without an excessive dependence on China – and is worth more on the stock exchange than Daimler, BMW and Volkswagen together. Will that change again? If I look at some market caps, they are a source of inspiration. Of course, our share price is suffering from the corona crisis. But even with the pre-Covid-19 level, I wasn’t happy. I am firmly convinced that there will be more for Daimler in the future.
The four models on your new electrical platform, which will go on sale in 2021, could provide impetus. Can you do that Overtaking Tesla? These are very important models for us. First comes the new S-Class in autumn, which should help us a lot with sales and profitability. With the EQS comes a luxury model that will have a range with a battery charge of over 700 kilometers. This will enable us to significantly strengthen our position.
If there is justified criticism, it is that we have to do more about the cost structure.
So far, models like the EQC only have an electrical range of just over 400 kilometers. How do you make the leap to over 700 kilometers? This is not a lever that we flip, but there are many adjustments that we can improve. I don’t want to reveal too much yet, but of course we use all the advantages of the latest generation of battery cells to increase energy density. In addition to the range, the digital equipment is also very important to us. We will also set standards here in the future.
For example, we are currently developing a software architecture for our cars, which we will introduce bit by bit. It will enable us to improve the performance of the vehicles even afterwards via the Internet. This opens up new opportunities for additional income. And they will not be irrelevant.
Speaking of business opportunities: What future do mobility services like Free Now have? This is a venture business for us. We have here with BMW already invested a lot. In terms of perspective, the cash flows must also be positive there, otherwise we will react.
At the end of 2019, you converted Daimler into a holding company with three related divisions: cars, commercial vehicles and financial services. Will all areas remain under one roof in the future? This is how we are positioned today, although the holding company will be leaner in the future.
Mr. Källenius, thank you very much for the interview.
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