Zetsche signs off as Daimler announces year-end results at AGM

23 May 2019

Zetsche signs off as Daimler announces year-end results at AGM

23 May 2019

Daimler CEO Dieter Zetsche has handed over his role to Ola Källenius at the company’s AGM, as the 66-year-old bids farewell to the company he led for a decade.

In his farewell message, Zetsche urged the carmaker to cut costs in order to prepare for unprecedented industry upheaval. The automotive industry is facing a number of challenges, from dwindling vehicle ownership to a decline in diesel sales and strict CO2 emissions targets.

‘Everything is under scrutiny,’ Zetsche said at the annual shareholder meeting in Berlin, citing costs, investments and the Mercedes-Benz product range. ‘We cannot and will not be satisfied with the current level of profitability.’

Turnaround

Zetsche began his career at Daimler in 1976 in the junior manager group and successfully held a number of management positions. With a doctorate in electrical engineering, he held management positions in the commercial vehicles business unit in Brazil, Argentina and the US before being appointed in 1995 to the board of management of Mercedes-Benz AG as head of sales and then to the board of management of the commercial vehicles business unit. In 2000, he assumed responsibility for Chrysler as CEO and President until 2005, when he became Head of the Mercedes-Benz Car Group. He was appointed as CEO of Daimler AG in 2006.

Zetsche, together with CFO Bodo Uebber, who is also stepping down, oversaw a number of key decisions at the German carmaker, including the sale of Chrysler in 2007, before the financial crisis pushed the US manufacturer into bankruptcy. The move required a significant restructuring of the Mercedes-Benz brand after quality problems as a result of the merger dented sales.

Zetsche and Uebber both received applause for their farewell remarks from some 6,000 shareholders gathered in Berlin, showing support despite eroding earnings in recent quarters and a weak start to the year.

‘We are not satisfied with the latest quarterly results and our share price,’ Zetsche said.

Zetsche will now hand the wheel to Källenius. He faces the difficult task of how to allocate shrinking profits and find savings to finance the shift to electric cars and digital services with a payoff that might be years away.

Split

Daimler shareholders at the AGM approved by a ‘large majority’ the biggest corporate overhaul since the merger with Chrysler. This will split the group into three legally separate units comprising cars, trucks and financial services.

The new structure, which will cost roughly €700 million, is meant to speed up decision making and allow the individual units to forge collaborations more easily.

The German business also continued to increase its unit sales and revenue in 2018 despite generally difficult conditions. Group EBIT and net profit reached solid levels, while unit sales increased by 2.4% to 3.4 million vehicles, meaning the company achieved its growth target. Revenue amounted to €167.4 billion while EBIT amounted to €11.1 billion, which is significantly below the prior-year level of €14.3 billion. Net profit decreased to €7.6 billion, from €10.6 billion in 2017.

Loss

The AGM occurred two days after the announcement that non-executive chairman of Daimler’s Mercedes-Benz Formula 1 team, Niki Lauda, had passed away.

The three-time world champion is perhaps best known for surviving a horrific crash at the infamous Nürburgring in 1976 that saw his Ferrari burst into flames. Despite severe burns to his head and lungs, he returned to the championship just 40 days later and lost that year’s championship by just one point.

In later life, Lauda was an accomplished businessman, running his own airline before returning to Formula 1 in a team management role. The Austrian was credited with convincing Lewis Hamilton to join the team in 2013, with the British driver going on to add four world titles to his tally with the Mercedes Formula 1 team.