Ola Källenius
The new mantra of the Daimler CEO is “Margin comes before quantity”.
Munich The carmaker has been fighting for two and a half years Daimler with steadily falling profits. The crisis of the Dax group is far from over. As a result of the corona crisis, the Mercedes manufacturer even reported an operating loss of almost 1.7 billion euros for the second quarter. But hope is growing on the capital market that Daimler the worst is now behind and the bottom has been reached.
“Daimler probably bottomed out in the second quarter,” says LBBW analyst Frank Biller. In particular, sales of the brand with the star in the important Chinese market had developed better than expected. “The free cash flow is surprisingly positive,” says Biller and sees “signs of hope”.
Jürgen Pieper from the Metzler bank also has the impression for the first time in years that Daimler is no longer paralyzing itself. “Finally, something is changing for the better,” said Pieper. The board’s austerity measures would gradually take effect. “Respect, I didn’t expect that so quickly,” said Pieper. The analyst also considers the realignment of Mercedes to be “sensible”.
Daimler boss Ola Källenius would have recently announced a new strategy in an interview with the Handelsblatt. He wants to trim the Dax group for yield by focusing the Stuttgart portfolio on the upper class again. “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.
The Swede refuses to expand into lower passenger car segments, such as his predecessor Dieter Zetsche. “We don’t want to compete with volume manufacturers,” says Källenius. Margin go before crowd. High-yielding sub-brands such as AMG and Maybach should therefore be strengthened.
The exchange rate is well received on the stock exchange. “We welcome Källenius ending his predecessor’s dreams. This whole competition for the crown of the leading premium manufacturer was misguided, ”says Michael Muders, fund manager at Union Investment. Yield and free cash flow are much more important than high quantities. “That has now been understood,” says Muders.
“You finally move the right levers”
These are unusual tones. Union Investment in particular has been one of Daimler’s harshest critics for years. But the mood on the capital market is gradually changing, says Marc Tüngler. The chief executive of the German Association for the Protection of Securities (DSW) now also believes that CEO Källenius can turn the ailing car maker. “You can tell: Källenius wants. I am therefore looking positively at Daimler again. ”The investors are also supporting the tightened austerity measures in Stuttgart.
Daimler plans to cut over 20,000 of its 300,000 jobs worldwide. Personnel costs are expected to drop by around two billion euros a year. “You finally move the right levers and you have the chance to get out of the swamp into which you maneuvered,” says Muders of Union Investment.
From the investor’s point of view, the problems at Daimler are still huge. The truck business continues to be a “disaster”. But Källenius and his CFO Harald Wilhelm would now consistently work through the company’s construction sites. “Now the renovation is determined,” stated Muders.
In fact, Daimler not only saves drastically on staff. The group is also significantly reducing its production capacity. In the United States and Mexico, the Swabians only want to build profitable SUVs in future and no longer limousines. The result: the production of the C-Class in Tuscaloosa in the US state of Alabama is discontinued. In the Mexican joint venture of Daimler with Nissan In Aguascalientes, only the GLB will roll off the assembly line in future, and production of the A-Class sedan will be withdrawn.
Daimler plans to sell the small car plant in Hambach, France. The group is also considering divesting another foreign factory. The assembly plant in the Brazilian Iracemápolis with 600 employees is considered a possible candidate. “It’s overdue that Daimler is sifting through its production,” commented Metzler analyst Pieper.
Initially, however, the streamlining of the factory network will cost almost 700 million euros. Daimler has to write off a further 105 million from its participation in “Your Now”, the joint mobility joint venture with BMW. In particular, the car sharing business under the “Share Now” brand has been going badly since the corona crisis.
More: Daimler wants to save two billion in personnel – How the car company should get back on track