Daimler will have a new CEO in the person of Ola Källenius, starting May 22, 2019, so Dieter Zetsche’s strategy will end, together with its tenure.
Daimler’s priority is to bring the Mercedes-Benz brand at a profit margin of 8-10% by 2021. In his latest statement as CEO, Zetsche has reported that Daimler is preparing for a large-scale cost cutting program. Increase stock market value, improve return: the Supervisory Board gives his successor, Ola Källenius, the former Chief Development Officer of Mercedes-Benz Cars, a major challenge.
The German press claims that Daimler’s new chief has been working for a few months on a program that would cut administrative costs by about 20 percent and Daimler save several billion euros.
Ola Källenius recently said that Daimler will significantly reduce the costs of developing new Mercedes-Benz models by 2025, and that it will intensify alliances with traditional rivals to improve profit margins.
With these plans, the Stuttgart group should earn more money again:
1) Workforce cuts
In the medium term, Källenius will probably cut about 10,000 jobs of the almost 300,000 Daimler currently has. New jobs are only waiting for software experts who support the development of new mobility services or who work on the programming of autonomous vehicles. A special place Källenius also deleted: In mid-April, the designated purchasing director Wilko Stark threw in the towel and told his boss and the Supervisory Board, he would not continue as the purchasing director of Mercedes-Benz AG.
2) Reduce costs
There were rumors that Källenius wants to reduce the costs in the central areas of the car manufacturer by 20 percent. This should raise several billion euros in efficiency potential. This plan is called “Move” and should already be quite advanced. By summer, the austerity package should be executed.
3) Leaner model portfolio
In order to free up capacities and financial resources for the development of hybrid and all-electric vehicles, the range diversity of more than 40 models and the high variance are scrutinized. Källenius wants to vaporize the wide range of equipment variants and rethink niche models. For example, the two-seater convertible SLC already celebrated its “Final Edition”. The SL will be developed by Mercedes-AMG in the future and will be technically related to the next-generation Mercedes-AMG GT. By 2030, every second vehicle Mercedes sells should have a purely electric drive variant. Currently, however, only SUVs and sedans are planned as purely electric vehicles.
4) Increase production efficiency
Daimler wanted to invest one billion euros in the expansion of the compact car factory in Keskemet, Hungary. Källenius and Zetsche recently stopped the commissioning of the new plant and postponed it for at least a year. After more than ten years of growth, sales of Mercedes in April were almost five percent below the level from the previous year. Inside sources say that it would be counterproductive to build up new capacity today. The new plant is designed to produce 150,000 vehicles a year. Until the capacity flows into the production network, the existing plants are better utilized.
5) Expand alliances
Källenius is a team player – and also wants to make the Daimler Group a team player. The cooperation with the competitor BMW, initially only in purchasing and since March in a joint venture for mobility services, will go ahead with vigor. The new CEO also wants to move forward as soon as possible with other projects such as a common platform for all-electric compact cars. Developments towards autonomous driving and a common electronic system are also on his wish list. Allegedly, Källenius also considers an IPO of the new mobility alliance with BMW. The joint venture is currently valued at six billion euros by analysts. Even so, Källenius will seek further partnerships, while also closing the cooperation with Renault-Nissan for the production of smart and commercial vehicles.